Gold’s retracement from last week’s 2,195 record high has been mild so far with support seen around the 8-Day MA the past couple of days. Although last week’s high hit several key target areas that could lead to a deeper retracement, demand has stayed strong. Today’s low bounced off the 8-Day line almost exactly, putting gold in a position to finish in the green with an inside day.
Demand Stays Strong
Since demand has stayed strong following last week’s peak, there remains a chance that gold will continue its ascent before a more significant retracement. A rally above today’s high of 2,180 will provide the next sign of strength. However, that should be followed by a breakout above yesterday’s high of 2,184 as it will further confirm the bullish signal. A continuation of the bull trend above 2,185 then becomes more likely.
Long-Term Breakout Confirmed
Since gold has broken out to a new record high and it was confirmed by a weekly close above the prior high of 2,135, there is a good chance that the next higher target zone could be reached. In addition, bullish signals were triggered on the monthly chart for gold. The breakout is from a multi-year basing pattern and the breakout has only just begun. The next higher target zone is from 2,235 to 2,247 and is derived from Fibonacci ratio analysis. Two 161.8% extended targets make up that range. The next higher target range beyond 2,447 is from 2,277 to 2,298.
Drop Below 2,156 Likely Leads to Deeper Retracement
Nevertheless, a deeper retracement becomes more likely on a drop below today’s low of 2,156 and confirmed on a drop below yesterday’s low of 2,151. The 8-Day MA is currently at 2,155. Previous resistance at the prior high of 2,135 may then be tested as support. Further down is the 38.2% Fibonacci retracement at 2,115. However, the more significant support area looks to be around 2,088. That level includes the 50% retracement, and it was a resistance peak in late-December.
Source: Fxempire
