Gold tried to breakout higher earlier in Wednesday’s trading session but quickly encountered resistance at 2,480. The recent record high last month was 2,484. Given today’s bearish reaction following a rise above the previous trend high of 2,477 from yesterday, it looks like a deeper pullback or consolidation may occur prior to another attempt to begin to challenge the 2,484 high.
Today’s pullback triggered a daily bearish reversal on a drop below yesterday’s low of 2,458. At the time of this writing gold is on track to end the day weak, in the lower third of the day’s price range.
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First Support Zone is 20-Day MA
It looks like a test of the 20-Day MA as support is likely. Currently, the line is at 2,418. Possible support from last Friday’s low is nearby at 2,417 and can be watched for signs of support along with the 20-Day line. Although a new trend high was reached, signaling a possible breakout of a symmetrical triangle consolidation pattern, it has failed.
Therefore, it is possible that gold spends more time within the triangle before another breakout attempt. Given the characteristics of the pattern a test of support at the lower boundary of the pattern may be possible. It is marked by a trendline and the 50-Day MA. The 50-Day is currently at 2,378 and marks a similar price area as the trendline.
Market Designed to Frustrate
The potential bullish breakout to new record highs for gold is being watched by many market participants. It is no secret that gold broke out of a long-term basing pattern in March and continued to strengthen. The 2,480-price level was a target established from a large rising ABCD pattern that began from the August 2018 swing low of 1,160 and the second leg up started from the September 2022 swing low of 1,615. Price symmetry between the two swings occurred at 2,480. And that price level was tested again today.
Initial New High Target of 2,566
If a bullish breakout occurs instead of further consolidation there is an initial near-term target for gold around 2,566. That would complete an extended target for a rising ABCD pattern that began from the September 2022 swing low. The pattern is extended to the 161.8% target at 2,566. Since it is a relatively long-term pattern resistance may be seen around the price area.
Source: fxempire
