Investing.com - The almost 2% fall in gold Monday confirmed fears that the metal’s trajectory is going to be bearish moving ahead.
The decline also strengthened the view provided by the commodity’s technical chart that the precious metal could be heading for a correction back to the $1,180 area, the first trough seen in its recent uptrend.
The sharp downturn and subsequent reversal points to an ABC wave forming in the coming weeks as the historical reversal zone around the $1,219.10 mark strikes again and looks set to hold, pointing to the completion of the ‘A’ leg of the ABC wave.
The second leg of the wave could bring gold back to the $1,244.25 handle, reinforced by oversold stochastics, Blackwell Global analyst Matthew Ashley says in an article published by Investing.com.
However, just because gold is moving into a near-term upward trend does not necessarily mean the precious metal will make the reversal to start the ‘C’ leg of the pattern as the old trend line comes back into play and is likely to be a source of resistance, forcing gold to retreat at the $1,244.25 mark, indicating the start of the final leg of the wave.
Once the final leg is underway, the highly bearish EMA bias is likely to push the metal into a rather steep decline, with the 100-day moving average providing considerable resistance as gold retreats.
This will limit chances of an intra-day sentiment swing disrupting the overall downtrend, with the metal finally poised to move back to around the $1,180.00 mark.