Gold Extends Gains to Record Highs
The price of spot gold extended gains to a new record high of $5,151 on Tuesday and it is set for a strong closing near the highs of the day. This is the seventh consecutive day of higher daily highs and lows. Gold will end the session at a new daily closing high, further confirming that buyers remain in charge. The low of the day at $5,013 provides short-term support.
Breakout Above $5,000 Confirms Buyer Control
Gold remains at risk of getting overextended but until then the price continues to rise. Monday triggered an upside breakout of a resistance zone identified by two indicators at $4,993-$5,000. A breakout of the psychologically impactful whole number of $5,000 seems to have inspired strong demand. Note that Monday ended in a weak position near the lows of the day following the breakout. Since that pattern did not resolve to the downside and instead led to a new trend high, the potential bearish implications from Monday were negated. A false signal can lead to sharp moves in the opposite direction. This may be what we are seeing in gold today.
Measured Move Targets Provide Upside Guidance
The next upside target for gold is the completion of a measured move at $5,211.78. That target is based on a percentage calculation, and it matches the upswing begun from the $3,268 swing low in August last year. The current measured move started at $3,886 from October. Then, further upside is the 127.2% projected target at $5,300.
First Signs of Weakness and Support Levels
First signs of weakness will be seen on a drop below a higher daily low. That could be the beginning of a pullback that leads to a test of support near the rising 10-day average, now at $4,821. A drop through Tuesday’s low of $5,013 may quickly drop through Monday’s low of $4,990. Closing prices below the prior day’s lows will confirm weakness. Since gold bounced from the 10-day average on January 6, it is expected to show signs of support if approached. If it fails to retain support, the 20-day average at $4,638 marks a lower target zone.
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