FX.co ★ Technical analysis of gold for October 5, 2016

For the last few weeks I've been bullish about Gold as long as price was above $1,300. I warned several times that a break below $1,300 would be a bearish sign and that prices would need to make a deeper pullback towards $1,250-$1,200. Yesterday we saw support fail and Gold crash.

Red line - resistance

Blue line - support (broken)

Gold price has broken through the $1,300 price level which was my important medium-term support. Price crashed towards $1,270. Bulls only needed to hold above $1,300 to have hopes for resuming the uptrend. They did not succeed in holding above support. On the other hand, heavy selling pushed price downwards towards $1,270.

What does this decline imply? This decline implies that the entire move from $1,045 to $1,375 is complete and over. A correction has already started. The 38% Fibonacci retracement is at $1,250 and this is the first level I expect to see the decline to stop and mount a reversal to the upside. However if we are only in the first part of the downward correction in Gold, we are now near completion of wave A, waiting for a wave B bounce and a wave C decline. My longer-term view remains bullish as I believe Gold has made a long-term reversal low at $1,045.