Gold’s Bullish Momentum: Are Record Highs on the Horizon?

Gold triggered an upside breakout above yesterday’s high before reaching a high for the day of 1,987, a match with the July 20 swing high. Next, we want to see gold close above yesterday’s high of 1,981 to confirm strength indicated from the day’s breakout. Gold exceeded the July 20 swing high during the current rally as it reached a high of 1,997. However, it did not close above it, which is what is needed next to confirm strength.

Upward Momentum Remains Strong

Momentum remains strong given that gold is trying to continue higher after a short two-day shallow pullback to the 23.6% Fibonacci retracement level. This shows that the precious metal retains strong underlying demand. Next, we need to see clear upside follow through to confirm the strength indicated by today’s breakout. The next sign of strength may be seen at today’s close. If gold ends the day above 1,981.37 it will be its highest daily closing price since May 16.

Bullish Monthly Breakout Triggered

The long-term monthly chart for gold must be considered as this month’s pattern is an outside month. Therefore, a bullish monthly breakout occurred. Earlier in the month gold dropped below last month’s low to a seven-month low as sellers were clearly in charge. However, subsequently a rallied followed that took gold above last month’s high and to a five-month high. Sentiment switched from clearly bearish to bullish within one month.

Since a monthly breakout just occurred and the monthly close will likely confirm strength to some degree, gold is on track to test record highs and likely continue higher. The first target for a new high in gold is around 2,097. That level is followed by 2,156. Each level is an extension of the retracement of a previous decline. Further analysis of potential upside targets will be provided as we gold progresses higher.

Support Levels if Deeper Pullback Occurs

On the downside, a decline below today’s low of 1,963 is bearish in the short term and may lead to a deeper pullback before gold is ready to proceed higher. Yesterday’s low and the low of the retracement at 1,953 will then be at risk of being busted to the downside. If that occurs, the 1,926 level will be in sight.

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