Gold Rallies to New Heights, but Can it Hold On?
Gold Forecast Video for 05.05.23 by Bruce Powers
Gold pops to a record high of 2,082 before quickly reversing. That high is 12 points above the prior record high of 2,070 from March 2022. The rally triggered a bull trend continuation and an initial breakout of a 12-year base that takes the form of a cup with handle. Resistance was seen at the completion of a small AB=CD pattern. Given the quick bearish price action off that high, it looks like gold could rest for a day or two before continuing higher if it is to make another attempt.
Rally Triggers Breakout of Large 12-year Base
What happens next will be telling for the long-term uptrend. Although there was a breakout of a 12-year base, the breakout is not confirmed until there is a daily close above the prior high of 2,070. That is the next thing that needs to happen for a new bullish sign. Gold is well above its 200-Day EMA, after being rejected from support of the line in early-May. Also, the 34-Day EMA (orange) was tested as support recently and price was rejected to the upside. Further, the relative strength index (RSI) momentum oscillator has turned up and crossed the downtrend line. Each of these indications supports a bullish outlook for gold.
Gold on Track to Close Weak Following New High
Nevertheless, Wednesday’s rejection at the new record high of 2,082 is cause for concern in the short term. Gold is now on track to close in the bottom 50% of the day’s range, and possibly in the bottom third of the day’s range. This would indicate a loss of upward momentum following the new high breakout. Not a big surprise given that the new high was not much above the prior record high.
Next New High Breakout Setting Up Next
After this next correction/consolidation phase gold should be poised to breakout to new highs and hold the breakout in preparation of a continuation higher. Gold can fall to the 34-Day EMA and retain its uptrend. Since the 34-Day line was tested as support recently over more than three days, a drop below the line would be bearish and indicate bigger correction is likely in the words. Currently, the 34-Day line is at 1,983.
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