Gold follows steadily declining trend line

Gold (daily chart) has been following a steadily declining trend line that extends back to the late August high just above 1425 resistance. This short-term declining trend has effectively created a bearish leg within the long-term downtrend that has been in place since the October 2012 highs near 1800 resistance. Currently, the price of gold has rebounded off the recent 1277 low to end up near the noted declining trend line as well as the key 1320 support/resistance level.

A potential continuation of the current bearish leg would be indicated on a breakdown below the noted 1277 low, which is also around the 61.8% Fibonacci retracement level of the recent bullish recovery (from the June 1180 low up to the August 1433 high). In the event of that breakdown, the precious metal could fall further to target a retest of the 1180 support low. Any strong breakout above the short-term declining trend line that also breaks above the 50-day moving average would have an upside objective around the noted 1425 resistance area.

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