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Gold’s Bull Trend Intact Despite Minor Retracement

By:
Bruce Powers
Published: Apr 7, 2023, 20:04 GMT+00:00

Gold finds support at the 38.2% Fibonacci level, but a drop below the 61.8% retracement level puts breakout at risk.

Gold, FX Empire

In this article:

Gold Forecast Video for 10.04.23 by Bruce Powers

Following Wednesday’s doji candlestick pattern, gold pulled back to test prior resistance near the top of a bull pennant. So far, support was found at the 38.2% Fibonacci level as gold bounced from there. Whether that support area around Thursday’s low of 2,001 continues to hold remains to be seen.

Graphical user interface, chart Description automatically generated

Minor Retracement is Healthy for the Uptrend

A minor retracement off the trend high of 2,032 is healthy for the trend. However, a decline below the 61.8% (not shown for clarity) Fibonacci retracement at 1,099 puts the trend at risk of moving into a deeper retracement or consolidation phase. At that point gold would be falling below the lower trend line of the pennant.

A bull pennant is bullish, and we should therefore see upside momentum sustained following a breakout. Bouncing off the 38.2% support level is also bullish as that is a relatively minor retracement, and it reflects buyers being aggressive enough to keep the price of gold from falling further. Nevertheless, a dip to the 50% retracement at 1,991 is also possible. That price level is above the pennant pattern, so still a normal pullback, but of course not as strong as if price continues to rally off a 38.2% retracement support.

In other words, both a retracement to the 38.2% and 50% levels do not negate the bullishness of the pennant breakout signal. If gold falls below the 50% level however, the situation becomes more uncertain, while a drop below the 61.8% retracement level puts the pennant breakout at risk of failure.

Strong Breakout Earlier in Week

The pennant breakout occurred on Tuesday with a strong wide range green candle with gold closing near the top of the day’s range. That’s exactly what we would like to see on a breakout of a trend continuation pattern. If the retracement holds above the 50% retracement area an upside continuation is anticipated.

Upside Potential for Gold

A measuring objective can be calculated from the bull pennant to arrive at a minimum target following confirmation of the pattern via a breakout. The target is estimated at 2,158. Other price levels to watch on the way up include a 161.8% Fibonacci extension at 2,044, a prior high at 2,070, and Fibonacci confluence around 2,134.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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