Gold (XAU/USD) Price Forecast: Bull Trend Holds Above Key Averages

Short-Term Consolidation Holds Above 10-Day Support

More short-term consolidation occurred in gold on Thursday as the precious metal dipped to a three-day low of $4,408 and completed another successful test of support at the 10-day moving average. Buyers stepped in following the low and drove price back up. At the time of writing, trading continues in the top third of the day’s range, putting it in a position to complete a bull hammer candle pattern today with a high of $4,479.

Bullish Trend Structure Remains Intact

Gold remains clearly bullish, with a bounce off the 10-day average providing a short-term indication that the buyers remain in charge. Key support is at the recent low of $4,274 as it generated a higher swing low. Remaining above the 10-day line will show sustained short-term strength but a pullback to potential support near the 20-day average, currently at $4,377, would not change the bullish posture. It is just that holding above the 10-day average shows slightly more strength.

Rising 20-Day Average Signals Improving Demand

The rising 20-day average is starting to breach the prior trend high of $4,381. That behavior shows improving underlying demand. Once the 20-day line reaches price again, volatility should improve with an upside continuation above the high of $4,500. Of course, this only applies if the 20-day line touches price before the breakout. An upside breakout can also occur before the average touches price. Gold should continue to hold above dynamic support near the 20-day line if it is to have a chance at a new record high above $4,550.

Monthly Candlestick Warns of Possible Near-Term Consolidation

Despite the bullish trend structure, a potential monthly bearish shooting star candlestick pattern completed in December. Even though the pattern is invalid until there is a breakdown below December’s low of $4,164, it reflects the potential for downward pressure as gold attempts to strengthen in January. A similar situation in the months of October and November resulted in an upside resolution as the monthly pattern never validated with a breakdown. October ended with a shooting star monthly pattern, followed by an inside month in November. Therefore, further short-term consolidation could occur before momentum kicks in to lead gold to a new record high.

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