Gold’s advance faces resistance at 2,477, with bullish consolidation hinting at a potential breakout. Key support levels remain strong, bolstering the bullish case.
Gold found resistance at a new high of 2,477 for the advance on Tuesday. Resistance was seen around the top boundary line resistance of a developing symmetrical triangle formation that was established following the 2,459-swing low reached last week. The significance of that swing low is highlighted by the convergence of the 61.8% Fibonacci retracement at 2,366 and the 50-Day MA at 2,366 in a similar price zone.
Plus, the top line for a long-term bullish trend channel points to the same area of price. It parallels an uptrend line starting from the November 2022 low. Notice that each of the two most recent swing lows successfully tested support at that line.
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Pullback Before Breakout to New High?
Two general scenarios look more likely as of today. Monday’s high of 2,473 first tested the top triangle line as resistance. It was confirmed today with a retest of the line and a narrow range day. Notice that gold closed strong yesterday, near the highs of the day and at its highest daily closing price ever. This is bullish behavior for the intermediate view.
Gold may continue to trace out the triangle consolidation for a while longer or trigger a decisive upside breakout. Further consolidation becomes possible if today’s low of 2,458 is broken to the downside. The lower support area of the triangle pattern would then become a target. But first there is potential support around the 20-Day MA, now at 2,418.
Minor Rest Before Breakout?
Alternatively, a bull breakout occurs prior to a pullback off today’s highs or following a minor pullback and/or consolidation period. The key resistance level is the record high of 2,484 from July 17. That price level is also the top of the triangle pattern and a rise above it would further confirm a bullish breakout of the pattern.
The initial trigger is on a rally above the top boundary line and today’s high of 2,477 is a proxy for that line for the time being. Given the potential bullish reaction to a new high in gold it seems likely to see some degree of a pullback or consolidation prior to gold taking a new shot at the record high. The price of gold has been rising since last Thursday’s low and demand may need a little time to build prior to a successful attempt at a new record high.
Source: fxempire
