Gold (XAU/USD) Price Forecast: Retains Strength as Triangle Pattern Forms

Gold took a rest on Wednesday and consolidated within Tuesday’s range. An inside day will therefore be established with a low of $3,358 and a high of $3,385. For the past three days support was seen around the convergence of the 20-Day and 50-Day MAs, now at $3,349 and $3,346, respectively. Interestingly, those moving averages align with the lower trendline (dotted) of a smaller symmetrical triangle pattern than currently indicated by the solid blue trendlines around the consolidation formation.

Consolidation Breakout Above $3,439

Until there is a decisive upside or downside breakout of the pattern, momentum is likely to continue to be muted as the triangle further evolves. But seeing support over the past few days at the combination of the moving averages and the prior trendline shows that in the short-term buyers remain in charge.

The next upside target is the top line of the pattern, which is where resistance is anticipated unless there is a breakout above the line, followed by a rise above the most recent lower swing high at $3,439. A sustained rally above that high is needed to trigger a proper breakout of the pattern.

Three-Day Low Support at $3,345

As gold continues to trade within consolidation, the three-day low of $3,345 can be used as a level to gauge support, as it is near the moving average lines. So, a drop below that level would be short-term bearish as it would indicate a break below near-term support. That would open the door to a potential test of support near the lower trendline of the pattern. The most recent higher swing low at $3,268 is key support and a drop below that level indicates a failed pattern.

Strong Bull Trend Suggests Eventual Upside Continuation

Nonetheless, the expectation is for an eventual upside breakout and continuation of the long-term bull trend. It is interesting to note that there are recent bullish indications on the weekly chart. Last week completed a bullish weekly hammer that formed following a reversal from support around the 20-Week MA. It shows a successful test of the weekly moving average line as support for the first time since it was reclaimed in early January.

An upside breakout triggered this week, signaling a weekly bullish reversal. In addition, there is a chance that gold may end the week at its second highest weekly closing price ever. That would be a sign of strength. It will accomplish that if the week closes above $3,368.

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