Gold (XAU/USD) Price Forecast: Resistance Cluster Caps Upside Momentum

Trendline Resistance Under Pressure

Gold once again tested resistance near the rising trendline during Thursday’s session, reaching a five-day high of $4,144 and a higher daily low of $4,031. That line had previously served as trend support, most recently confirmed with the prior swing low of $4,023 from June. The high and low of the day mark key near-term resistance and support, respectively.

Moving Average Confluence Tightens the Range

However, on the upside gold is limited to a test of resistance near the falling 20-day moving average around $4,162, which will soon align with the uptrend line, further strengthening this resistance zone. Nonetheless, if that average can be reclaimed and followed by further strength, an advance to the downtrend line may follow. The 50-day moving average is near $4,412 and falling rapidly towards the downtrend line. Since the market already recognized resistance near the 50-day moving average twice since its breakout was reversed in March, it represents a more formidable dynamic resistance zone.

Bearish Structure Still Dominates Medium-Term Trend

Let’s not forget that a continuation of the bearish breakdown from the 200-day moving average triggered in early June has remained in effect, and it was followed by a pullback and confirmation of resistance below the average along with a lower swing high. That is bearish behavior that supports further downside. Nonetheless, a counter trend rally within the larger downtrend structure would be appropriate, and a test of the 50-day moving average could be what results in a new lower swing high. Keep in mind that the 50-day moving average is anticipated to be below the recent lower swing high at $4,382 if it is reached.

Support Zone Defines Downside Risk

A failure to reclaim the 20-day moving average looks likely to be followed by further testing of a support zone that lies from around $3,927 to $3,886. It is supported by the midline of a wide descending trend channel, which has previously acted as support at prior lows. Another possibility is that gold consolidates further below the uptrend line and at or slightly above the support zone.

If you’d like to know more about how to trade gold and silver, please visit our educational area.