February gold futures have recently formed a bearish descending triangle pattern on the daily bar chart. Prices last week hit a fresh two-month high of $647.30, but have since backed off and have seen a series of lower daily highs to form the bearish near-term chart pattern. If February gold pushes below solid technical support at last week’s low of $621.00 an ounce, then that could be the beginning of a downside “breakout” from the descending triangle formation.
Measuring implications of this particular triangle pattern suggest that a downside breakout would show a downside price objective to around $595.00 an ounce. Bulls would have to push February gold futures back above chart resistance at $635.00 an ounce to negate the bearish descending triangle pattern on the daily bar chart. Above that lies solid overhead technical resistance at $640.00 an ounce. A close above more solid chart resistance at last week’s high of $647.30 would be significantly bullish and would suggest a move above resistance at $650.00 an ounce, and higher.
click on the chart to enlarge
See, too, at the bottom of the chart that the Moving Average Convergence Divergence (MACD) indicator has just produced a bearish line crossover signal, whereby the thick blue MACD line crossed below the thin red “trigger” line. Gold market traders have taken a keener interest in the value of the U.S. dollar versus the other major currencies the past few weeks. It will likely take a weakening greenback to help jumpstart the gold market bulls.
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