Momentum Strengthens Within Three-Week Advance
Gold extended gains to a new high of $4,890 on Friday, as it tested resistance near the 50-day moving average and the 61.8% Fibonacci retracement zone. Although the advance paused, gold is set to end the session at its highest closing price of the current three-week bounce, while also marking the third consecutive week of higher weekly highs and higher lows.
Support Holds as Buyers Defend Key Moving Averages
A relatively strong close in the top third of the day’s range would follow another test of support at the 10-day moving average as the session’s low of $4,767 tested the average. That is short-term bullish behavior, especially since it is occurring just above support indicated by the 100-day moving average at $4,719, reinforcing the developing upside momentum noted in recent sessions.
Resistance Layers Define Next Breakout or Rejection Zone
A lower swing high at $4,640, along with the 20-day moving average, identifies a lower short-term support zone, as a drop below it will signal likely further weakness. Since Friday was the first approach to the 50-day moving average to test it as resistance since it broke as support on March 18, resistance may persist. However, a decisive breakout above the 50-day average, followed by a daily close above it, would put the 78.6% Fibonacci retracement at $5,122 in sight. The downtrend line is nearby, and it also represents the top boundary of a falling trend channel. This is notable since the bottom boundary of the channel was confirmed as a support zone during the sharp March selloff.
Confluence Support Suggests Potential for Continuation
Gold is sitting on a strong support confluence zone consisting of the 10-day, 20-day, and 100-day moving averages, along with the top channel line of a long-term rising trend channel. This suggests that a breakout above the 50-day average may be possible before a drop below this zone. Once prior resistance becomes support, as seen with the three moving averages, the short-term bull trend is showing an intention to continue higher.
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