Buyers took back control of the price action in gold on Monday as a one-week bullish reversal and bull flag breakout triggered. Today, on Tuesday, gold exceeded Monday’s high and reached a 10-day high of $3,418. At the time of this writing, gold continues to trade near the highs of the day and may go higher for the day before it is done. The low of the day at $3,323 marks near-term support as it established a higher daily low.
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Bull Flag Breakout
The bull flag breakout followed a relatively minor pullback to $3,202, which came after the recent $3,500 record high. Support was seen around the confluence of the 20-Day MA and 50% retracement levels. Given the subsequent bullish reaction following a successful test of support around the 20-Day line, it should be considered as potential support going forward. The bullish behavior around the 20-Day MA is also supportive of a bull trend continuation in the price of gold.
Solid Bullish Momentum
There was a relatively sharp rise in the price of gold following the April 7 swing low of $2,956. The price of gold subsequently advanced by as much as $557 or 19% in 10 days. Although a similar advance following the bull flag trigger may not be achieved, it does indicate that there is a chance of a sharp rise in the price of gold now that the pullback consolidation phase shows completion. This puts the $3,500 at high risk of being exceeded.
New Highs Points to $3,581
Nonetheless, it first needs to be considered as potential resistance. Upward momentum just started from Monday’s lows. But by the time price rises to confront the prior high bullish momentum may diminish. Certainly, there is a good chance for this to some degree. A Fibonacci extension of the recent bearish correction points to possible upside targets of $3,581 based on a 127.2% measurement, and $3,684 when using a 161.8% extension calculation. The potential upside indicated by the bull flag was alluded to above and certainly it points to the potential for aggressive buying behavior during this next phase of the long-term bull trend in gold.
Source: Fxempire
