Gold (XAU/USD) Price Forecast: Bull Trend Reasserts Toward Record Highs

10-Day Average Reclaimed as Dynamic Support

Gold extended its rally from support near the 20-day average on Tuesday, reaching a five-day high of $4,494. Recent signs of strength included a reclaim of the 10-day average on Monday and a successful test of support at the average on Tuesday. Tuesday’s higher daily low of $4,428 confirmed a switch of the 10-day average to dynamic support. Moreover, Monday’s advance reclaimed the prior trend high at $4,381 after a test of support near the 20-day average at the low of the day.

Range Resistance May Slow Advance Toward Highs

Together, the above indications point to a likely continuation of the bull trend as gold heads towards the record high of $4,550. However, despite the clear signs of strengthening, gold remains within a trading range established by a wide range bearish red candle from December 29 that formed following the high. It represents a range of potential selling pressure, which could impact momentum in the current advance and lead to further corrective behavior for the precious metal. This is not a prediction but rather a pattern to be aware off that could hobble the attempt at new highs.

20-Day and Channel Support Reinforce Bull Trend

Regardless, dynamic support for the bull trend was confirmed on Monday with a bounce off support near the 20-day average, which is bullish behavior at a key trend indicator. In addition, the recent pullback following a new record high was minor with support confirmed at the top trendline of a rising trend channel. It shows bullish momentum improving with as the overall rate of ascent increases. The fact that the 20-day line and top channel line – both long-term levels – also marked the same area of support near the pullback low of $4,274, is bullish behavior.

Confluence Zones Define Next Upside Targets

The first new high target zone is identified by the confluence of several indicator. An initial price range goes from around $4,664 to $4,713. Also, a little higher is a level at $4,766. Other than $4,687, which is the 161.8% extension of the recent bearish correction, the price levels are derived from long-term measurements. If the top level is eventually exceeded, gold looks like it will head to $4,942, which is the 450% extension of the 2011 bearish correction.

For a look at all of today’s economic events, check out our economic calendar.