Gold price battles to hold on to support

AFTER a steep decline, the gold price is trying to hold onto an important support level. There is a lower target, so expect support to break, with more downside to eventually come. Gold ($) – Lower target Recommendation: Sell short rallies Trend: Down on all main timeframes. (Daily)

Gold has dropped to reach its first target from a head and shoulders continuation pattern (labelled s-h-s, in grey). But a recent breakdown below line 3 is significant because it confirms a larger head and shoulders continuation pattern (S-H-S, in red). There is still a significantly lower target based on that (Target 2).

Its short-term stochastic is oversold, so a temporary bounce could occur at any time.

Sell short the gold price on a two to three-day bounce.

Target 1, $1 108 (about R13 970) has been reached. Target 2 is down to $1 006, based on the height of the large head and shoulder pattern projected down. This is perhaps more medium term. In the immediate short term, it could bounce back to the $1 110 to $1 120 level for more shorting.

For a short trade, stop is a close above $1 130. There is support at line 1 ($1 089.50); that is currently being tested. That might hold the price up a bit before it continues lower. Colin Abrams is an Independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za