Gold Price Outlook – Gold Continues to Bounce Around on Friday

Gold Technical Analysis

The gold market had initially rallied on Friday, only to give back the gains, as we continue to see a little bit of consolidation. Ultimately, this is a market trying to determine whether the $4,000 level will hold or if another breakdown is coming. We had seen a massive move to the upside, followed by a significant reversal. The question now is whether the market can build any momentum. If we turn around and break below the 50-day EMA, then $3,500 becomes a potential target, as it was the top of the previous ascending triangle that we were watching for weeks, if not months, a while back. With it being so obvious, it makes sense that the level will be important again.

For bulls, the best-case scenario is either a mild rally or, better yet, a sideways move. Going sideways would work off some of the excess froth in the market and help traders become more comfortable with gold trading around $4,000 an ounce. The longer this consolidation lasts, the more bullish it becomes, as traders start to accept that level as fair value, which can often lead to consolidation and even sideways trading action.

If prices were to surge again, the $4,200 level remains a major resistance barrier—a true brick wall. Anything above that would obviously be bullish, but moving there too quickly would risk another unsustainable, parabolic move. The recent surge was followed by a 7 to 8% drop almost instantly, which shows how vulnerable the market can be to sharp reversals, which can cause chaos in the trading accounts of retail traders. This market will likely continue to see a lot of volatility, and therefore, a bit of position sizing and care should be taken into account.

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