Gold (XAU/USD) Price Forecast: Bulls Defend Support, Eye $5,345 Target

Daily Action and Confirmation

Gold advanced to a slightly new high for the bounce at $5,250 on Tuesday, following a dip below Monday’s low to a daily low of $5,091. A daily close above a three-week high of $5,119 on Monday confirmed a bullish continuation from the recent swing low at $4,402. If Tuesday also closes above that level, a second bullish confirmation day is established.

Support Levels and Weekly Breakout

Key support is near the confluence of two moving averages. The 10-day and 20-day moving averages mark potential support at $5,036 and $5,021, respectively. Since they are essentially on top of one another, those moving averages should continue to hold as support if gold is to have a chance at higher prices. The weekly breakout is supportive of higher prices as well. It confirmed on a daily basis and may do so on a weekly basis once there is a weekly close above the $5,119 high.

Pullback and Initial Upside Target

A pullback to test support before an attempt at a higher bounce would be healthy for the gold trend. It would also provide an opportunity for traders and investors to hop on the long side. However, an initial upside target for gold is at $5,345, which is the 78.6% Fibonacci retracement of the recent bearish decline following the record high at $5,598. That level is also marked by an initial 100% projected target for a rising ABCD pattern. Since two levels identify the same price target, it is assumed to have a good chance of being reached before the current advance completes.

Long-Term Bull Trend Context

In the bigger picture, gold remains in a decisive long-term bull trend. The 50-day average was successfully tested as support during the recent bearish correction to a higher swing low of $4,402. That was the first touch of the 50-day line as support since it was reclaimed in August. The subsequent bullish reaction from that low confirmed its significance. Moreover, the low completed an 88.6% Fibonacci retracement of the prior internal upswing. It also found support at the top of a trend channel, which previously represented resistance until it was broken to the upside in early January.

Upside Potential and Shor-Term Consolidation

For now, upside potential for gold is the 78.6% Fibonacci retracement and the current peak at $5,598. Given a sharp three-day 21.4% decline following the peak, further consolidation within the three-day range seems likely once a high for the current bounce is reached.