Gold is under bearish pressure as prices drop below important levels

Gold prices face bearish pressure as key support levels come into focus. Analysts eye potential downside targets if the precious metal breaks below critical zones, with $2,252 and $2,195-$2,211 being closely watched.

Presently, gold prices are weak since gold has fallen below several key technical levels on Thursday. If the gloom persists, the present bearish price action has drawn momentum back to major support zones and potential downside targets.

Gold fell vertically Thursday closing near the day's lows after failing the test of breaking through the previous day’s low of $2,311. This led to a breakout of a small bearish flag pattern, which had been in the process of being formed over the last few days. Resistance was experienced at $2,327 lower than the high of $2,342 displayed on Wednesday due to the increased selling pressure.

“This fully confirms the red weekly candle and therefore prepares gold for a further descending movement,” said Bruce Powers, a technical analyst. ‘However, further evidence of this trend will be required as recent milestones might still prevent the decline.

The first level of support is situated in the area of the lowest value of the previous week, which is $2,287, with the second level being identified at $2,277 – the prior swing low from May. The price is below the 50-day moving average and the bearish bar at the key resistance in this area yesterday also makes a deeper pullback riskier. 

Powers further explained that a breakdown below this level, specifically $2,277 would give a clear bearish signal. A break below $2,287 suggests weakness, however there is support visible around the swing low of the May and hence a breakdown may not be sustainable.

If the bearish pressure continues, the next support level can be seen at $2,252 below which will create a breaking of the ABCD pattern and signify the symmetric bearish pressure between two dips. If the price falls below this pattern, there is a likelihood of finding support in the $2,211 to $2,195 region that had been a resistance level before the breakout in gold.

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Since the lower uptrend line forms the border of the rising parallel trend channel, its slope will also be important if these lower prices are reached. Gold investors and traders will be focusing intently on these important levels to assess just how much and for how long the bearish pressure on the precious metal is likely to continue.