Key short-term support at the current low of 2,659
A drop below the current low of 2,659 could lead to a test of support around the top flag trendline or the 20-day MA around 2,645. However, if the 20-day line fails to hold as support, the possibility of a deeper retracement and failure of the bull flag breakout could be in play.
Price behavior around the 20-day line should provide clues and be seen as an area of potential support. Note that during the flag pullback, the 20-day line was crossed for a few days, but it was regained relatively quickly.
Weekly Breakout Support Rally
Also note that last week’s low was 2,638. It also provides an important price level, as a decline below it would trigger a weekly bearish reversal. That’s not what one would expect if gold has the opportunity to break through to new all-time highs after the bull flag is triggered. The weekly chart (not shown) provides support for this week’s bullish scenario, leading to a bullish weekly reversal on a move above last week’s high at 2,661. Last week’s pattern is a bullish hammer candlestick.
Rally above today’s high leads to upside continuation
A decisive rally above today’s high should lead to a new high in gold and signal a continuation of the bull trend. Then it heads towards a Fibonacci confluence zone where resistance is seen. The confluence zone is from 2,724 to 2,754. However, when calculating a potential target based on the bull flag formation, a price of 2,815 is indicated. This does not mean that it will be achieved quickly, but that it may happen eventually. Objectives are one of the least reliable components of technical analysis. Nevertheless, it indicates a potential upside for the gold price once a bullish continuation of the trend is activated.
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