Gold Price Forecast: $4,443 Breakout Could Signal Next Leg

Gold Tests Resistance After Support Fails

Gold fell to a new pullback low of $4,292 on Friday before buyers quickly regained control, resulting in a gain for the day and an initial test of key resistance. At the time of writing, the precious metal is on track to close near the lower rising trendline, which is being tested as resistance after gold fell below the line on Thursday.

Given the subsequent bullish reaction following the low, there was a successful test of support near the recent swing low of $4,282. That low is important structure support, as it represents a higher swing low within the developing uptrend. The rising 50-day moving average near $4,269 is also a significant trend indicator. Since it is rising, it should soon get above the $4,282 swing low and then Friday’s low, assuming it holds as a low.

Confluence Points to Potential Momentum Surge

Friday’s low could result in a second bottom of a potential double bottom reversal pattern and complete the first significant pullback since a bullish reversal from the recent bottom began in early-August. Of more immediate interest is the tight consolidation range that has formed at the intersection of several trendlines that are expected to converge by next Wednesday. This confluence of trendlines also reflects consolidation and a narrowing range, which could be a prelude to a momentum surge.

On the weekly chart, the consolidation is reflected as an inside week. This week’s high of $4,443 is below last week’s high and the low for this week is at $4,292, which is above last week’s low. That range provides key resistance at $4,443 and support at $4,292, respectively. Since gold remains in a relatively significant consolidation, as reflected on the weekly chart, a decisive breakout through either end of the range could lead to further movement in that direction.

$4,443 Breakout Could Confirm Second Leg

Since a key support zone has held so far, with the 50-day moving average near $4,269 defining a lower support boundary, there is the potential for a second leg up from the bottom. The first leg up showed signs of a reversal of the prior downtrend, while a second leg up would further confirm those bullish signals and increase the potential for a continuation of the developing advance. A decisive move above $4,443 would provide an early signal that this second leg may be beginning, while a breakdown below $4,282 would weaken that bullish setup.

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