Gold (XAU/USD) Price Forecast: XAU Tests Key Support at 50-Day Moving Average

Gold fell to a new pullback low of $3,295 on Tuesday before there were signs of support. That was an 11-day low and an initial test of support around the interim swing low from early June at $3,293. More significant is the relationship with the 50-Day MA. It was breached today on a drop below $3,322. What happens next may provide a key clue as the 50-Day line has represented dynamic support for the uptrend since it was reclaimed in early-January.

There were two periods starting in April where gold found support on a retracement around the 50-Day MA. Those instances validated the 50-Day line. There has not been a daily closing price below the 50-Day MA since it was reclaimed. So, a decisive daily close below that line could lead to further signs of weakening.

Weekly Support at $3,293

The interim higher swing low at $3,293 is also a weekly low and close to the previous week’s low at $3,296. Together, they identify a potential significant weekly support level. Therefore, a sustained drop below $3,293 could see a burst in momentum as the possibility of a failure of support at the 50-Day MA would increase. If a weekly breakdown occurs then there is potential support at the crossover of two trendlines, at $3,271, and an earlier higher swing low at $3,245. Alternatively, if a breakdown is followed by a quick recovery above prior lows, then that could also be a sign of an end to the pullback.

Above $3,370 Needed for Bulls

Given the current trend pattern, a decisive advance above today’s high of $3,370 would be needed for signs of strength that might be sustainable. That would also put the price of gold back above the 20-Day MA, which is now at $3,352. As noted above, the behavior of gold around the 50-Day MA, may provide clues as to what could be next. Each of the recent two tests of support at the 50-Day ended by daily closing prices above the line. There was only one day that the line was breached earlier in the trading session, and it was recovered before the close.

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