Pullback Finds Support at Prior High and 10-Day Average
Gold dipped to a four-day low of $4,537 on Friday before finding support and bouncing. An intraday advance pushed it into the top half of the day’s range, which is where is looks ready to end the day. There is significance to Friday’s low as it corresponds with support represented by the confluence of the prior trend high at $4,550 and the 10-day average at $4,540.
Bullish Structure Reinforced by Successful Support Test
This is bullish behavior, as that price zone is the first anticipated support area for gold, and support has been seen. The market is confirming significance of the 10-day indicator and if gold remains above that line, the short-term trend is bullish. Friday’s low provides a possible minor swing low if it is sustained, and key short-term support along with the 10-day line.
Upside Breakout Levels and Near-Term Resistance Zone
On the upside, a decisive breakout above the record high of $4,643 is needed to trigger a continuation. However, gold will then quickly approach a potential resistance zone from $4,664 to $4,721. There are four indicators marking that range as a potential resistance zone. Given confirmation of strength with a bounce off the 10-day average on a pullback following a new all time high, gold could quickly push through that price zone and head towards a 78.6% projected measured move at $4,760.
Fibonacci Confluence Highlights Upper Resistance Risk
The top of the range, however, shows minor confluence with two indicators and therefore possibly a more significance resistance area. A 432.6% (261.8% + 161.8%) is at $4,713, and the 161.8% Fibonacci extension of the December decline is at $4,721. The first 127.2% extended target from December was near the trend high at $4,625 and shows a relationship with the ratios. The recognition of the first retracement ratio target enhances the chance that the higher 161.8% price area is reached as well.
Weekly Momentum Slows but Bull Trend Remains Intact
Momentum shows slowing somewhat on the weekly chart, as gold is set to close near or below the mid-point of the week’s range, which was $4,578. A stronger closing price in the upper half of the week’s range would show greater control by buyers and therefore increase confidence that bullish momentum may dominate once again. This week began with a new all time high on Monday, followed by a stall.
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See all Gold forecastsNonetheless, this week’s breakout confirms on a weekly basis with a closing above the prior high of $4,550. Whether bullish momentum shows soon or after some consolidation, the bull trend remains solid if gold remains above the 20-day average, now at $4,466.
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