Since August the XAU has displayed the following behavior. A sharp drop followed by a 14-day to 16-day correction that retraces between 50% and 61.8% of the previous decline. Today, prices hit the 50% retracement level and made a bearish reversal candle on the 15th day off the 75.54 low. Prices breaking below the green trendline could lead to another selloff.

It’s hard to believe the pattern will repeat since gold prices are already oversold. However, it’s something I will be monitoring the rest of the trading week.

-XAU WEEKLY- On a weekly basis, prices have bounced into stiff resistance where the 10, 50, and 200-week moving averages are all converging. It would take a weekly close above the 20-week moving average (86.72) to neutralize the bearish trend.

Significant technical damage has been done to the charts. Gold is very oversold and due for a bounce. Nevertheless, oversold conditions can persevere longer than most foresee if we are in fact dropping into an 8-year cycle low. A drop below the 75.54 low in the XAU could lead to a capitulation selloff phase in metals and miners.