Gold (XAU/USD) Price Forecast: Sitting in Bullish Position

Gold continued to test support around the 50-Day MA and resistance near the 20-Day MA on Friday, although futures markets closed early due to a U.S. holiday. The 50-Day line was reclaimed on Tuesday and was followed by daily closes above the line. That line now represents support. The relationship would start to change with a drop below the 50-Day line, at $3,321 currently. However, a clearer sign of weakness would be indicated on a drop below Thursday’s low of $3,311 and then Tuesday’s low of $3,301 marks the next near-term support level of note.

Bullish Sentiment Drives Breakout

The bull trend pattern got a lift on Tuesday as an uptrend line, a downtrend line, and the 50-Day MA were all broken through. Confirmation came with a daily close above all three lines. Resistance was seen around the 20-Day MA, which has continued since then along with a slightly higher price of $3,366.

Given this week’s bullish price action the expectation is for gold to continue to advance higher, but it first needs a signal. A decisive rally above this week’s high of $3,366 indicates a continuation of the near-term bull trend. That will also trigger a weekly upside breakout and surpass the 20-Day MA, which currently shows dynamic resistance.

Weekly Timeframe Confirms Strength

On the weekly timeframe, gold ended the week showing gains and in a relatively bullish position, in the top third of the week’s trading range. Furthermore, this follows a short-lived decline below last week’s low of $3,256 before a lower weekly low of $3,247 was reached. In other words, an undercut and run bullish reversal triggered. Last week’s lows broke, leading to stops being triggered and weak holders getting flushed out.

Subsequently, buyers quickly took back control following a short time below last week’s low. And the switch to bullish sentiment was indicated by a daily close above last week’s high on the breakdown day of June 30. That showed a failed breakdown. Once a breakout fails in one direction, there is potential for a clear move in the opposite direction. For gold that would point to higher prices.

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