Gold reaches potential support zone

Gold (XAU/USD) declined as much as 6.9% recently, after hitting a swing high of 1,307.6 three weeks ago. That high was right in the area of the 127% AB=CD extension (1,302.8), and the 78.6% retracement (1,299.7) of the downtrend measured from the 1,345.3 peak.

So far support was found at 1,217.2, right in the area of neckline support of the Inverse Head and Shoulder pattern. The probability that the retracement may be complete for now is increased by the fact that there is also the confluence of two Fibonacci retracement levels in the same price area. Both the uptrend measured from the bottom of the head (50% at 1,219.9) and the uptrend from the bottom of the right shoulder (61.8% at 1,221.2) indicate support in the same general price area.

Alternatively, if the recent low is broken to the downside watch for support at the next area of Fibonacci confluence, 1,199.1 (61.8%) to 1,197.1 (78.6%).

If gold is able to rally from current levels it has a good chance of getting up to at least the Head and Shoulders target, which is at 1,345.6. That price area is right in the area of the July 2014 peak. However, it first will need to get over the 1,307.6 peak. (

About the Author
Bruce Powers, CMT, has over 20 years experience in the financial markets. Previously, he was President at WideVision, a Dubai based FinTech and IT services company, which published, and where he also was Chief Technical Analyst. For the past eight years Bruce has written a weekly column on the UAE stock markets titled \'On the Line\' for the Gulf News newspaper, and has appeared numerous times as a guest on TV business shows. Bruce is a Chartered Market Technician (CMT) and until recently served as Co-Chair of the CMT Association Dubai chapter, which he Co-founded.

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