Gold Price Forecast: XAU Sets Stage for Breakout Toward Record Highs

Gold continued to strengthen on Thursday following a successful test of support at the 20-Day MA (purple) on each of the prior three days. A five-day high of $3,399 was reached before a minor intraday pullback kicked in. This is the fourth day in a row of higher daily highs and higher lows, and there was a break above a trendline that had defined dynamic resistance for the prior three days as well.

Further, bullish sentiment was confirmed by a rise above a lower swing high at $3,366 (B) from June 2. The June 2 breakout indicated a possible bullish reversal of the recent bearish corrective trend, and it was confirmed by a daily close above that swing high on the breakout day.

Improving Signs of Demand

Nevertheless, rather than being followed by strong bullish momentum, gold has been consolidating with lower volatility. Nonetheless, the long-term bull trend remains intact and is showing signs it may be ready to proceed. A downtrend line for the recent correction that marked potential support following the upside breakout held up relatively well. There were only a few days when gold traded below the line, and it didn’t fall too far below it before finding support around the 20-Day MA.

Rise from 20-Day Moving Average Support is Bullish

The 20-Day MA was last reclaimed on May 21 and gold has largely traded above that line since then. Once the first pullback following a breakout is complete, the trend should be ready to proceed. This week’s price behavior confirms support around the 20-Day line and sets the stage for a continuation of the June breakout. In addition, the 20-Day MA is now above the downtrend line, and it turned up this week after being relatively flat since May 20.

Breakout Above $3,403 Will Confirm Strength

A decisive breakout above the minor swing high at $3,403 will provide the next bullish signal, with strength confirmed by a daily close above that price level. Ideally, if gold is to have a chance to challenge the record high at $3,500, bullish momentum should improve once the $3,403 price level is broken. The next decision point would then be the prior lower swing high of $3,439. A rally above that price level would trigger another bullish reversal signal.

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