Upper channel line stops ascent
Note that resistance was observed around the combination of a 250% extended retracement level at 2,754 and the upper rising parallel trend channel line. However, given the potential for higher targets, a bullish continuation above this week’s high is expected after a period of consolidation or a pullback. Gold recently broke out of a bullish flag pattern, after a final test of the 20-day MA as support, on October 15.
A flag formation measurement target points to a final target of 2,815. But it’s not just the flag that identifies that price area. There are two other Fibonacci readings that confirm the price area. One points to 2,797 and the other to 2,808. Together, the above price levels generate a potential upside target area from 2,797 to 2,815.
Watching Inside Day Breakout
An inside day breakout, either up or down, will point in the next direction, unlike a false signal. Today’s highest resistance was 2,743 and the lowest was 2,714. More importantly, Wednesday’s high of 2,758 and low of 2,709 provide more significant price levels to gauge strength or weakness. The key support levels are the recent trend break area at 2,686 and the 20-day MA at 2,670. Both could provide strong support.
MA above 20 days maintains bullish outlook
As long as the gold price remains above the 20-day MA during a pullback, the outlook for gold remains bullish. If gold falls below the 20-day line and continues to fall there, the 50-day MA at 2,594 becomes a target. Note that the 50-day line has risen and is on its way to converge with support at the bottom of the flag pattern, at 2,602.
For a look at all of today’s economic events, check out our economic calendar.