Gold prices recently defended a critical support area.  Let’s see Gold’s daily structure and note the confluence of Fibonacci and Moving Average support.

Gold has strengthened roughly 30% from its November 2008 lows, but fell short of breaking to new highs on its run-up in February.

We’ve experienced an expected/orderly pull-back/retracement off the $1,000 per ounce level into a key confluence support level that was critical for ‘gold bulls’ to hold.

The support comes in at $858/$860 per ounce, which reflects the 50% Fibonacci retracement off the October/November closing lows and the February high.  The 200 day simple moving average also rests at the same level, giving us confluence support that has held.

There is also a fractal Elliott Wave count (not shown) which holds the swing from $1,000 to $900 in March as fractal Wave A; the swing back up to $975 in March as being Wave B; and finally the swing down to the $850 level in April being the final Wave C of the possible correction phase.  If this fractal Elliott is correct, then we’ve just begun an upward impulse that could challenge or exceed the $1,000 level… provided the $850 support level holds.

A positive momentum divergence set-in at the $850 lows and price cleared the converging EMAs… though dropped back beneath them.  Bulls need to push price comfortably above the EMA support line at $900 to make the forecast clearer.  As such, holding above $900 per ounce would tip the balance overwhelmingly in favor of bulls; breaking beneath $850 would tip it back to the bears.

Let’s keep watching as the structure unfolds, but for now, it seems that $850 will hold as key support.

Corey Rosenbloom, CMT
Afraid to Trade.com

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