Gold (XAU/USD) Price Forecast: Faces Key Support Test as Volatility Set to Rise

Gold tested near-term trend support on Thursday, including the 50-Day MA, as it reached a two-day low of $3,311. This further compressed the recent price range as resistance was seen around the 20-Day MA, now at $3,348, for three days, including today. Then today, there was an outside day bearish reversal that triggered, with a weak closing price. Despite the lack of upside momentum following Tuesday’s break above a short trendline and the 50-Day MA, today’s closing price was above the 50-Day line.

That shows underlying strength being retained since gold rebounded from below the 50-Day line hit earlier in the session. Further weakness may be seen if Tuesday’s low of 3,301 is broken, as that would put the price of gold back below a rising trendline shortly after being reclaimed. That is bearish behavior.

Bulls Watch for $3,366 Breakout

Near-term resistance is clear at today’s high of $3,366. Therefore, a decisive breakout above that level has gold heading towards a prior lower swing high at $3,396. And it has a good chance of busting through there and continuing to a test of resistance around the recent swing high of $3,451. Slow momentum has been a concern since a trendline breakout triggered on June 2.

That rally subsequently fizzled following the $3,451 high, with gold eventually falling back below the 20-Day MA, where it remains. Therefore, another reclaim of the 20-Day line should be met with some enthusiasm from buyers as indicated by bullish price momentum. And there is the potential for volatility to increase.

Trend Support Retained

Notice that the most recent bounce from support at the 20-Day MA (purple) in early-June was followed by a relatively sharp three-day advance. It ended with a bearish outside day, like today. This only becomes relevant if Tuesday’s support fails and bearish momentum rises. Volatility should increase soon given the convergence of the 20-Day and 50-Day MAs recently. They are now the closest to one another since the beginning of the current upswing that began in January. That could help pump up a bull breakout.

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