Developing Higher Swing High
Gold looks to be establishing a possible higher swing high within the developing bounce. After breaking below support at the 20-day moving average on Thursday, gold recovered the average on Friday and looks set to close above it for the day. A slightly higher low was established at $4,884, with Friday’s range contained within Thursday’s range. In addition, the 10-day moving average was tested on Thursday and Friday as a support zone as well. Friday’s close will be above that trend indicator confirming short-term support.
Momentum and Swing Low Confirmation
Bullish momentum declined this week as gold failed to extend gains much beyond the lower swing high at $5,092 (B). The high for the week occurred on Wednesday at $5,119, which was followed by a drop to Thursday’s low of $4,879 – a five-day low. That low has the potential to be a higher swing low, but confirmation would require a rally above Thursday’s high near $5,100.
Upside Targets and Resistance Zones
A continuation of the bounce will be indicated on a rally above this week’s high. That will likely lead to a quick test of resistance near the 61.8% Fibonacci retracement at $5,141, followed by the next upside target at the 78.6% Fibonacci retracement at $5,345. That price zone is also marked as the initial 100% projection for a rising ABCD pattern. Since two indicators are marking the same spot, it may act like a magnet and pull price to it, strengthening its significance as resistance. Also, the confluence makes it a likely significant resistance area.
Consolidation and Alternative Scenario
There is another scenario that may develop if Thursday’s low is broken. Lower volatility, as exhibited this week, may continue for a while longer as gold consolidates above the 50-day moving average, now at $4,562, and below this week’s high at $5,119. During that time, it will build demand for an eventual continuation of the advance towards the 78.6% retracement.
Weekly Chart Signals Strength
On the weekly chart, gold established a slightly higher weekly high and a higher low at $4,879. Moreover, this week’s closing is set to be the highest ever, exceeding the previous weekly closing price near $4,988. That suggests that underlying strength remains for gold and that a higher bounce is indicated, eventually. Key near-term weekly support is therefore at $4,879.
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