Where is the bottom on Gold?

With the very strong decline in the price of Gold on Friday, everybody is wondering where is bottom here now. Well, it is kind of hard to estimate that as we run out of the horizontal supports and Fibonacci retracements. What comes with help here are the trendlines and what is very interesting, they cross in a psychological barrier of 1100 USD/oz. Where are those trendlines coming from? Red one is the down trendline connecting lower highs from April 2013 till early 2016, when it got finally broken. Second one is the long-term up trendline (green) connecting higher lows as early as from 2006. As you can see, you cannot underestimate the importance of those supports and a bearish breakout can be lethal here. Interestingly, as mentioned, they both cross on the psychological barrier of 1100 USD/oz.

When looking for a bottom on gold, we have to remember what was happening at the end of 2015, when the price was making record mid-term lows. Many producers were saying that levels around 1050 USD/oz are the last from acceptable by them and if the price would go lower, they would decrease the production and limit the output. From the price swing since then, we can assume that they are more serious with their statements comparing for example to OPEC.

That is the long-term situation. In the short term, sentiment is definitely negative and welcomed by price action traders. Why is that? Well, look at those nice correction movements on the hourly chart. They are the same in terms of the principle involved. So we have a trend continuation pattern (flag or a wedge, green lines) and then a breakout and a downswing, it is repeated four times. We can assume that this scheme will be continued as long as the price stays below the black line, which helps the downtrend in the mid-term. Gold buyers should just accept the current state and wait for the ultimate support (1100 USD/oz) to come as we are not so far away from it as one can think.