Gold has traded above the 20-Day MA for the past few days and again successfully tested the line as support today. This puts it in a critical short-term position. A drop below yesterday’s low of 2,332 is a break below daily support and the 20-Day MA, which is at 2,333 today.
Alternatively, a decisive advance above today’s high of 2,359, at the time of this writing, is a sign of strength, as it would signal an inside day breakout. However, a rise above Monday’s high of 2,364 is a more significant signal and has a better chance of seeing gold continue to strengthen from there. But the trend high of 2,378 needs to be exceeded to the upside before a trend continuation signal is generated.
Two Lines Mark Support
In addition to trend support represented by the 20-Day line, the uptrend line touching the lows of the most recent price action should also be given some attention. Notice that the 20-Day line and nearby uptrend line will converge within a day or two.
It could be hinting at further consolidation for a few more days. This week is an inside week so far. It is possible the week ends with the price of gold staying within the trading range of last week. If so, a sharper and sustained advance to challenge the 2,378 high and possibly exceed it, may have to wait until next week.
Drop Below 2,324 Eyes Deeper Pullback
On the downside, a bear flag may be in the process of forming with the internal uptrend line as a proxy for the lower boundary of the flag. It is not clearly formed yet but deserves to be watched to see if it progresses and becomes more clearly defined.
A drop below the trend line could see gold drop to test the 50-Day MA at 2,274. That price level is very close to the most recent swing low of 2,277. Given gold’s strong rally from the mid-February swing low, a test of support around the 50-Day line would not change the overall bullish outlook for gold. In fact, it would better prepare the market for a continuation into new record highs.
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