The metal’s slide last week saw it break the 200-day average at $1,306, its February low at $1,303, the 50 percent Fibonacci retracement of its December-January rally at $1,301 and its 55-week moving average at $1,293.
That leaves it vulnerable to a further pullback, initially to last December’s low at $1,235 an ounce.
“The obvious place to go from here is the 200-week moving average at $1,234.90,” Commerzbank technical analyst Karen Jones said, adding the $1,235 region could be achieved within a month.
A more significant level for gold is the uptrend going back to 2001, which comes in at $1,199/1,220 an ounce, she said.
Gold has found some support at the $1,285-1,283 area, with the sell-off looking overstretched after last week’s 2 percent fall.
That will be a key level, Richard Adcock, managing director at Adcock Analysis, said. If gold consolidates here, it could create a bullish head-and-shoulders pattern that would target a return to $1,383 an ounce.
However, he said, the pattern is taking a long time to form.
“If the first retracement support gives way, that could mark a more serious deterioration and expose a deeper sell-off risk.”
Jones sees interim support in the $1,270 area before $1,235 is targeted. That is also the location of gold’s December low, and is the pullback zone suggested by the double-top chart pattern that has been forming so far this year.
A double top is created when a price fails to break a chart point, pulls back, then stumbles again at the same level.
Gold has twice this year stopped short of breaking decisively above $1,365 an ounce, pulling back in the interim to near $1,300.
According to technical analysts, the target for a break of the pattern is a move of the same magnitude below the breakout point. In this case, that would take prices to $1,235.
“You will have several forces hitting the market at this stage,” independent technical analyst Cliff Green, of the Cliff Green Consultancy, said.
“When we get the break down, you get some long liquidation; you get those who have been short adding to positions; and you get those who have been sitting on their hands waiting for a breakout coming in short as well.”