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Gold Price Forecast: Minor Pullback Following New Record High

By:
Bruce Powers
Published: May 21, 2024, 20:20 GMT+00:00

Gold retreated slightly on Tuesday, pulling back from the new record high of $2,450 hit in the previous session.

In this article:

Following an advance to a new trend high of 2,450 yesterday, gold pulled back slightly on Tuesday, falling below Monday’s low of 2,407. Today is the first day in six that the price of gold fell below a prior day’s low. Last week gold ended strong, closing at its highest weekly closing price ever. However, following a rise to a new record high, Monday ended weak, in the lower half of the day’s range and below the prior record high of 2,431. The closing price was 2,426.

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Top Channel Line Shows Support

Nevertheless, there was a minor bullish indication given with today’s low of 2,406, as it successfully tested support at a top trend channel line. Last Thursday that line was specifically resistance at the peak of the day, and now showing signs of support. This is bullish price action that is typical for a developing bull trend. Subsequently, we have near-term support at today’s low of 2,406 and resistance at the high of 2,434. A breakthrough either should point to the next likely direction in gold, either bullish continuation or retracement and consolidation.

Rally Above Today’s 2,434 High is Bullish

A decisive rally above today’s high of 2,434 shows strength and may lead to a test of Monday’s 2,450 high and possibly a continuation higher. The next higher target zone was almost reached yesterday. It includes two Fibonacci extension targets and runs from 2,461 to 2,462. The 2,462 has potentially greater significance as it covers a measurement from a longer time frame than the 2,461 level. When measuring the retracement of the 51-month decline that started from the August 2011 trend high at 1,921, a 161.8% extended retracement completes at 2,461. That price level is enhanced by a shorter Fibonacci extended target marking 2,460 as a target.

Outlook Remains Bullish

The overall outlook for gold is clearly bullish given recent price action. Notice that the purple 20-Day MA has started to turn up after a minor downward sloping phase, and it has converged with the internal uptrend line. As of last Friday, gold was back above both top trend channel lines following a drop back below the lines on April 22. An initial bullish breakout from the parallel trend channel triggered on April 8. Notice that both lines identified a similar resistance area on the breakout day as the lines were crossing. A second breakout of the channels looks like it may be the one that can keep advancing.

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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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