SINGAPORE: Spot gold may retest a support at $1,776 per ounce, with a good chance of breaking below this level and falling towards $1,764.
The bounce triggered by this support proved to be a pullback towards a trendline. It has ended around a resistance at $1,795. The metal is riding on a wave a, the fifth wave of a double-zigzag.
The whole pattern seems to be developing within a falling channel, which suggests a target of $1,757. Once gold falls to this level, the uptrend from $1,720.49 may have remote chance to resume.
On the daily chart, the shape of the consolidation from $1,684.37 looks more and more like a wedge, which may turn out to be a bearish continuation pattern.
The lower trendline of the wedge points at a target of $1,739. From a longer-term perspective, the downtrend from $2,072.50 has only been half-finished. It may eventually extend far below $1,684.
Based on this interpretation, the war between China and Taiwan is very unlikely to break out as gold prices generally soar before a declaration of a war. Geopolitical risks can boost demand for safe-haven assets such as gold.
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