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Gold Price Forecast: Bounces Above 20-Day MA Amid Choppy Market Moves

Following last week’s bearish pullback to a low of 2,325, gold continues its bounce. It has managed to get back above the 20-Day MA after falling below it for a few days, and it might close above the line. If it does end Tuesday’s session above the 20-Day line, a minor bullish signal will be provided. Also, the downtrend line was successfully tested as support today following a rise above the line on Monday. In a rising market a successful test of prior resistance as support is supportive of a bull trend, even if only for a short time frame.

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Trendlines and Pivots
Both the downtrend line and the 20-Day MA are identifying a similar price pivot zone. Two trendlines are slightly above today’s high and could present short-term resistance if gold rises to test those lines. Nevertheless, a rally above last Thursday’s high of 2,384 is needed for confidence that an advance can keep rising. A rise above Thursday’s high would put gold above the top trend channel line and the up-trend line, thereby further indicating strength of demand.

Last Week’s Price Action Provides a Clue
Regardless of potential bullish signals, gold may continue to experience choppy moves with weak follow-through given last week’s price action. History supports this. Last week ended with a wide-range red outside week, with a low of 2,325 and a high of 2,450 (record high). Therefore, trading within the range can experience an impact like what is seen when trading occurs inside a consolidation pattern.

A similar situation happened following a new record high of 2,135 on December 4 of last year. The week ended as a wide-range bearish red candle with a close near the lows of the week. Notice what happened afterwards following a brief new low that led to a bounce. The following eight weeks traded within the range of the initial candle that eventually formed a symmetrical triangle consolidation pattern. It took an additional two weeks to complete the pattern and for gold to break out and begin to rally again. Although the pattern may be different this time, the possibility of a few weeks or more of consolidation before gold is ready to advance again, cannot be ruled out.

Source: Fxempire