SINGAPORE: Spot gold is expected to fall into a range of $978-$1,086 over the next three months as it has broken a pivotal support at $1,200 per ounce.
Support has formed around the 38.2 percent Fibonacci retracement on the rise from the 1970 low of $34.95 to the record high of $1,920.30 (in red color). The break below this support has opened the way towards $978, the 50 percent retracement.
There is a higher support, however, at $1,086, the 50 percent Fibonacci retracement on the rise from the August 1999 low of $251.70 to $1,920.30 (in blue color).
These two supports form the target zone.
The fall has been disrupted by a weak rebound from the Nov. 7 low of $1,131.85.
The rebound has been caused by a support at $1,154, the 61.8 percent Fibonacci retracement on the rise from the Oct. 24, 2008 low of $680.80 to $1,920.30.
This rebound could be classified as a pullback towards the former support at $1,200, now a resistance. An extension of the rebound may be limited to $1,301, the 50 percent level.
Indeed, a closer look at daily the chart from June 2013 onwards suggests the pullback could have completed.
This pullback is not only towards $1,200, but also towards the lower trendline of a wedge, which formed from June 28, 2013 to Oct. 6, 2014. This pattern points a target around $1,050.
The drop from the March 17 high of $1,391.76 could have adopted a complex double-zigzag pattern. A total of seven waves will form this pattern, so far, only three have unfolded.
The fourth wave labeled a could have started towards $1,101, the 161.8 percent Fibonacci projection level of the preceding wave c.
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