Gold – Further Downside Eyed After H&S Break

Gold has continued to trundle higher on Friday but as was the case a week ago, momentum in the move is fading as it closes in on a notable resistance zone.

Since the yellow metal burst through the $1,200 resistance last month, it appears to have lost some of its spark and with it now approaching possible resistance between $1,290 and $1,310, I wonder if it has what it takes to break beyond here.

Gold Daily

The rising wedge that has formed over the last month suggests it may be topping out, with confirmation coming from a break below the wedge support. This may take a few weeks to materialise but if it does, it could mark the end of the rally that began at the start of the year.

Of course, should we see a break through the top of the wedge, it would indicate a continuation of the trend, but having failed to again today, this is looking less likely.

On an intra-day basis, we could see some more downside in the coming days, despite having found early support around $1,262.

Gold 30m

The correction that has followed has seen Gold run into resistance around $1,270, which provided support in the early hours of this morning. It’s also the neckline of the head and shoulders that it broke below earlier on.

While the conservative price projection – the size of the move from the shoulder to the neckline, projected below the neckline – has already been hit, the more aggressive projection – the size of the move from the head to the neckline, projected below the neckline – could still be hit.

This falls around $1,251.50 and is the upper end of the resistance zone that it broke above earlier this month.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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