Gold prices are in consolidation as traders await the next catalyst.
Price action is not giving too much away at this juncture, but there are bearish tendencies on the 4HR time frame.
Gold has been consolidating following a long stint to the upside and has started to show signs that a break to the downside is on the verge.
Bears will need to be patent to ensure that there are high probabilities that the price will extend to the downside below the structure.
The following is a top-down analysis that illustrates where a potential short trade for a 1:3 risk to reward opportunity might emerge from.
Monthly chart
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Weekly chart
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Daily chart
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This is the point where the market structure becomes really interesting.
Note that the price is holding within a wedge formation that if broken, should result in an extension of whichever side the price moves out from.
We would like to see a proper test of the 38.2% before the price resumes to the upside within a fresh bullish impulse on the monthly charts.
A break of the support structure will offer a chance to get short somewhere along the line and the 4HR chart is best to display where that opportunity might arise from.
4HR chart
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The conditions are already bearish with the price below the 21-EMA while RSI offers room for the price change to the downside in relation to recent lows and highs while MACD is below zero.
However, bears need to be patent and see whether the price follows suit, falls below the aforementioned structure and on a retest, holds below what will now be new resistance.
A sell limit order would be an ideal methodology to enter short at that juncture and target the monthly 38.2% Fibonacci level for a 1:3 risk to reward setup.
