Near-Term Consolidation and Price Action
Although gold hasn’t moved much in two days, it remains huddled near the recent high of $5,250, reflecting continued buying pressure. On Wednesday, it consolidated inside Tuesday’s range and within a three-day range that takes the form of a small pennant. It formed near support of the 61.8% Fibonacci retracement at $5,141 as it attempts to break above that level.
Technical Observations and Moving Average Significance
It is interesting to note, that following a decisive reclaim of both the 10-day and 20-day moving averages on Friday above $5,011, there has not been a pullback to test the prior short-term resistance area as support. This shows buyers remaining in control. The averages where almost on top of each other at the breakout, giving greater potential significance to the price area.
A pullback to test prior resistance as support would be normal behavior. However, the low of three days is at $5,091, which barely dipped into Friday’s range. That is a sign of short-term strength that suggests an upside continuation may occur before a deeper pullback. Although the moving averages are providing information, gold is in a consolidation phase, not trending. This means they should not necessarily be given the same significance as in a trending market.
Upside Targets and Strength Confirmation
Gold is showing the potential to continue its rise from the $4,402 corrective low at the beginning of February. Since a higher swing low at $5,119 was recaptured and a breakout of a key Fibonacci retracement level is in process, the next upside target at $5,345 comes into view. Continued signs of strength suggest the rally goes to that price zone before completing. That upside target remains valid unless support at the moving averages and Friday’s low at $4,982 fails to hold as support.
Weekly Trend Context
On the weekly timeframe, gold broke above a three-week high of $5,119 this week and it will confirm the breakout on the weekly time frame with a close for the week above that level. It is also interesting to note, that the prior two-week periods ended at record weekly closing highs, also showing underlying strength in demand. Although this shows a strong rebound after a 21.4% decline, demand will need to be reassessed if the 78.6% upside target is reached.
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