On October 22, in the gold market, following a prolonged period of consolidation at the start of the week, the probability of a breakdown was increasing. The frequency and strength of upward probes diminished, while repeated tests of lower lows became more frequent, raising the likelihood of a downside break. Ultimately, gold prices broke below the 4,100 threshold today, with the next double-bottom support zone at 4,066/73.
Yesterday's gold price action met expectations. During the daytime session, prices held above 4,100 and staged a dip-then-recovery move. In the evening session, the market exhibited a textbook cyclical pattern of rallying then pulling back, confirming the validity of the 4,155 resistance level. Multiple short-long entries were given with 4,100 as the defense level, and short positions were selected below 4,155 on rallies. The approach was entirely correct. As I noted earlier, the rebound highs were progressively lower, with the overnight limit high shifting down to 4,144. Highs kept declining, and after multiple tests of 4,100, rebounds occurred but lacked the strength to break higher. After repeated harvesting at the same level, caution was warranted. This is why we did not attempt long positions above 4,100 in today's early session. Sure enough, gold lost the 4,100 mark and accelerated downward.
When a wall falls, everyone pushes. The breakdown of the 4,100 threshold triggered an acceleration of the decline. As mentioned yesterday, a break below 4,100 would target the 4,066/73 zone. Before this article was even finished, gold had already reached 4,070. A cliff-like plunge should not come as a surprise. The next approach is clear: with 4,100 now acting as resistance after the top-bottom conversion, the bias is bearish. Watch the 4,066 level closely. A break below would trigger another wave of selling and a sharp decline. If the European session fails to break through 4,066, consider a small-stop long position below 4,066 for a brief bounce. If a new low is breached, exit the long at a loss and reverse into a short position.
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