Gold was trading in an upward sloping sideways channel with an overlaping pattern that we noted yesterday. We also noted that this upward move could be a corrective pattern if the support at 1,320 was broken. Our next target would be at 1,300-1,290 if support was broken and this is exactly what happened. Support levels failed and the precious metal tested the 1,272 lows by reaching near 1,277.

The cuurent pattern is bearish as a new low below 1,291 was made yesterday initiating a pattern of lower lows (1,304-1,277) and lower highs (1,375-1,350). This pattern combined with the fact that the upward moves were overlapping thus corrective and the downward moves impulsive, makes us confident that the bigger downward trend is in force once again and we should expect more downside pressures.

In the daily chart a bearish pattern is being formed. A head-and-shoulder pattern is being formed and the neckline support at 1,275-80 if broken could justify a move to new lows towards 1,140. We are bearish as long as prices trade below 1,350. The short-term resistance is found at 1,305 and 1,325. It would be good for bears that the precious metal does not test those resistance levels, but, on the other hand, it would be great to see the neckline support break. Support is found at 1,275-80 by the neckline. If this support fails, the road towards 1,140 is open and we should expect a sharp decline towards that level.