Gold could be in for a deeper drop toward the recent low of $1,280, a bearish continuation pattern confirmed yesterday indicates.
The yellow metal fell 1 percent to $1,294 on Thursday, confirming a bear flag breakdown - a bearish continuation pattern, which usually accelerates the preceding bearish move.
The 14-day relative strength index (RSI) is reporting bearish continuation with a below-50 print.
On the 4-hour chart, the RSI has breached the ascending trendline and is currently holding below 50. Further, the bearish crossover of the 50- and 100-candle moving averages (MAs) has gained credence with yesterday's price drop from $1,311 to $1,294.
As a result, the bear flag breakdown could yield a sell-off to $1,275 (target as per the measured move method) over the next week or two.
Also, it is worth noting that the bear flag breakdown has boosted the odds of the yellow metal creating the right shoulder of the bearish head-and-shoulders pattern with the neckline resistance at $1,281.
- R3 1328.94
- R2 1321.12
- R1 1308.71
- PP 1300.89
- S1 1288.47
- S2 1280.65
- S3 1268.24
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