Gold Consolidates Near Support: Key Levels and Potential Breakouts

Bruce Powers
Published: May 23, 2023, 20:10 UTC

Technical analysis suggests that gold's bullish outlook relies on maintaining the uptrend line and avoiding a daily close below it.

Gold, FX Empire

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Gold Forecast Video for 24.05.23 by Bruce Powers

Gold has been trading in a relatively tight range for the past four days as it consolidates around support from the February peak (1,960). The parameters of range include a high of 1,986 and a low of 1,952. It has already completed a 38.2% Fibonacci retracement at 1,977 and has fallen halfway to the 50% retracement at 1,944. Also, a little lower is possible support around the 100-Day EMA, currently at 1,933, and a minor swing low at 1,934. The uptrend line is also close by.

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Strong Rising Trend Channel

The uptrend line provides dynamic support for the trend. Gold should not close below it on a daily basis in order to maintain its current bullish outlook, particularly since it is close to the 100-Day line. Nevertheless, if it does get below the line the critical 200-Day EMA is at 1,881 currently. Another test of the uptrend line as support would better prepare gold for a more aggressive rally once a bullish reversal occurs.

Lower Support Areas

A rally off the lows of the current retracement shows strength. However, a continuation a little lower will shake out more longs who may decide to jump back in once support is confirmed. Also, note that there is a potential double top showing on the 14-Day relative strength index (RSI) momentum oscillator. It could happen fast. If gold does dip below 1,952, watch for the possibility that the drop recovers quickly. If that happens it will be a bullish sign.

Bounce from Current Levels Likely Met with Resistance

Alternatively, gold strengthens from current levels. In that case a bullish signal is indicated above 1,986. Gold then heads up into a potential resistance zone from the recent rising consolidation trend channel. The bottom trendline is currently around the 38.2% Fibonacci retracement at 2,002. Higher up is the 50% retracement at 2,017. Depending on how long it takes to rally, gold could hit the 50% level while staying below the uptrend line.

Typically, price looks to retrace a prior move and test prior support as resistance. The short uptrend line was support and now resistance. A first rally to test the line as resistance will likely be met with resistance that turns price back down.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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