Support Reclaimed, Resistance Overhead
Key short-term trend support for gold is marked by the recently reclaimed 10-day moving average, reflecting a strengthening of demand. However, an important potential resistance zone remains a little above the rally high of $4,871 established on Wednesday. That high was approximately 18.9% above the recent corrective low of $4,099, which found support near the 200-day moving average.
Testing the Next Barrier
Given the current trajectory, it looks likely that gold will more specifically test the next resistance zone around $4,894 to $4,901, consisting of the 50-day moving average and the 61.8% Fibonacci retracement, respectively. That average was a key trend support indicator for the prior upswing, and it is now likely due for a test as resistance.
At the same time, the current advance has shown strength by reclaiming the 100-day moving average and the upper boundary of a trend channel, which have been aligned recently, each identifying a similar resistance zone. This is bullish behavior for the long-term trend that could result in a break above the resistance zone, potentially leading to a continuation higher if resistance is decisively cleared.
Channel Structure and Upside Path
A falling trend channel is shown on the chart outlining the bearish correction that followed the $5,598 record high in January. The lower parallel line of the channel was confirmed with a second touch during the March low, which was also near a 61.8% Fibonacci retracement level, the midline of a large rising channel, as well as the 200-day moving average. This confluence of support increases the significance of that low. A bullish reversal from the low of the channel suggests a possible move to the top falling trendline. The 78.6% Fibonacci retracement is at $5,122 and may also provide a guide if the top line is approached following a sustained reclaim of the 50-day average.
Failure Risk Below Support
On the downside, a drop below this week’s low of $4,640 will trigger a one-week bearish reversal and confirm a failure of support at the 100-day moving average and the 20-day moving average. That could then lead to another decline to further test support near lower levels. The 200-day moving average at $4,209 remains the more significant lower support indicator for the long-term bull trend, bringing the focus back to the broader theme introduced at the start, whether reclaimed support can continue to hold and sustain the developing recovery attempt.