Consolidation day
Because the sellers did not maintain control today, there will be no follow-up to Monday’s sale. Overall, price action remains near the highs of an uptrend and tests resistance around a trendline. Until there is a bearish follow-through, the potential for an upside breakout remains. While a rise above today’s high may show strength, it may not indicate enough demand for gold to move higher. That should be more evident with a rise above Monday’s high at 2,698, and further above the swing high at 2,698.
Above 2,698 shows strength
If gold makes a bull breakout attempt above the 2,698 swing high, a deeper pullback could first help strengthen demand around key support levels. Both the 50-day MA at 2,645 and the 20-day MA at 2,637 identify possible support. And while a drop below the lower 20-day line would be bearish, that would really depend on what happens next around the minor uptrend line. That line also represents possible support levels and can be used as a guide to identifying signs of strength or weakness.
Weekly bullish sentiment
Bullish patterns on the weekly chart (not shown) support an eventual resolution to the upside for gold. Last week’s advance caused a break to a four-week high. The week ended strongly, with gold finishing near the highs of the week’s trading range and at a seven-week weekly closing high. Additionally, last week’s strength followed a successful test of support around the 20-week MA for several weeks.
It shows strong underlying demand for gold and the maintenance of the uptrend from October 2023. That is when the 20-week MA was last reclaimed. Generally, once the price is rejected against the price zone of the 20-week MA, there is a higher chance of a decisive advance. Similar behavior was observed after the February 2024 swing low and the August 2024 swing low, as well as the November swing low.
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