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Gold – Wedge Break Points to Broader Correction

Last week I suggested that Gold appeared to be topping out with price action having formed a rising wedge as it closes in on prior resistance, at a time when divergence had formed. (Gold – Further Downside Eyed After H&S Break [1]).

The confirmation that I was waiting for was a break below the wedge support, which came a little earlier than I was expecting but still indicates that a broader correction, at least, is underway.

Gold Daily [2]

One of the benefits of rising wedges is that they offer possible price projections following the breakout. This is typically calculated using the size of the wedge opening, projected below the breakout point.

On this occasion, the opening is around $75 ($1,266-$1,191), which would give us a possible price projection of around $1,165.

Gold Weekly [3]

Not only is this a previous area of support and resistance, it also coincides with the 50% retracement of the move from 3 December lows to 11 March highs.

Prior to this, Gold could run into support around $1,190-1,210, with it having been a key support and resistance zone over the last year.

N.B. At the time of writing, US retail sales, empire state manufacturing and PPI data has been released and the dollar has weakened off the back of it, which has sent Gold higher. If Gold breaks back within the rising wedge off the back of this, we may have to wait a little longer for the correction to get underway, assuming it still does.


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 [7]

Senior Market Analyst, UK & EMEA at OANDA [8]
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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