Good day traders! A couple of days ago, the continuous futures contract of Gold reached the 0.786% Fib retracement level, measured from the all-time high to the 2015 low.
For price to have simply reached a Fibonacci retracement, in itself, is not that significant in my opinion. What is significant however is the presence of a possible Expanding Triangle pattern, that either completed its D-wave already or needs to make one higher high above the recent top.
These patterns are always volatile and have strong one-directional moves up and down. Considering the current global and economic issues, it would be fitting that we are starting to see these volatile patterns pop up. Gold is not the only market where this is currently happening, some currency pairs look like they are stuck in the same pattern.
The chart above shows the Gold spot chart and note that price has not reached the 0.786% retracement level yet. Perhaps we will only see a reversal lower once the spot price has reached the upper resistance line?
Saying that this pattern will definitely turn Gold lower is still pure speculation, but its appearance should make traders cautious. Also note, that I’m not saying that this is the top in Gold but that another wave lower is probable, which could complete the E-wave of the pattern before we see price rise again.
Do not be surprised if Gold overshoots the upper resistance line before a reversal happens because that is a common occurrence with these patterns, but should a reversal occur then we could see a move lower towards the 1600 and 1440 price levels.
Bias: Bearish during possible E-Wave
Potential targets: 1600 and 1440
Until next time, have a great day and stay safe!