Gold (XAU/USD) Price Forecast: Rally Pressures Key Fibonacci Resistance

Gold Tests Resistance at Prior Swing High

Gold is showing signs of continued strength, as it has been pushing up against a resistance starting from the recent lower swing high at $5,092. Wednesday was the third day that resulted in a narrow range with a high near the zone. The high for the day was $5,119, exceeding the swing high and approaching a 61.8% Fibonacci retracement of the recent large downswing at $5,141. That is the high of the resistance zone. Nonetheless, the structure of the counter-trend rally suggests that higher price may be tested.

Second Leg Higher Confirms Counter-Trend Structure

Following last week’s low of $4,402, gold established a first leg up in a bounce to the lower swing high at $5,092. That resulted in a pullback to a 61.8% Fibonacci retracement and a lower swing high at $4,655. The second leg up began from that low and was confirmed today on an advance above the lower swing high. A daily close above the Fibonacci level at $5,141, a bulls continuation signal will be confirmed.

Fibonacci and ABCD Pattern Point to $5,342

A full retracement of the bearish correction from the record high suggests an upside target near the 78.6% Fibonacci retracement at $5,342. That target is confirmed by a rising measured move as shown by the rising ABCD pattern on the chart. A 100% projection of the first leg up completes at the same target. That is where the CD and AB legs of the advance match. Once there is symmetry between the two legs, resistance might be seen.

Breakout Confirmation Required Above $5,141

Despite the potential for further upside, a bullish continuation signal first needs to trigger above $5,141 and then confirm with a daily close above that level. If a pullback occurs first, gold might drop to test support near the 20-day average, currently at $4,936. However, this week’s low of $4,965 is part of the weekly trend structure of higher weekly lows. Although this week is not complete, a drop below that level would be short-term bearish.

$4,655 Higher Swing Low Defines Key Support

A pullback to lower prices could go get closer to the higher swing low of $4,655 (C) before bullish momentum leads to another attempt to get above the 61.8% Fib zone. So, if gold remains above $4,655, there is a possibility that the ABCD pattern eventually reaches the higher target.

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