Risk of being overbought
Note that in the current upswing (CD), gold has made progress since the 2,582 (C) swing low. At today’s high, gold was up 203.63 points or 7.9% from 2,582. In percentage terms, that gain is slightly above the average of five previous consecutive rebounds that occurred since early May 2024. These are measured moves with gains ranging from 7.08% to 8.65%.
On that basis alone, gold could continue to show resistance in the short term, leading to a pullback before rising above the current high. Nevertheless, if a breakout above 2,790 occurs before a pullback, gold risks losing momentum shortly afterwards as upside momentum began to accelerate after January’s small interim higher swing low and subsequent recovery from the 50-day MA .
Breakout above 2,790 Targets 2,823
A sustained rally above 2,790 has a chance of hitting the next higher target, which looks to be around the 127.2% extension of the current bullish ABCD pattern (purple) at 2,823. The 100% target was reached today at 2,772 and gold plowed right through it. Further ahead is the extended 127.2% target for a bullish ABCD pattern starting from the February 12 swing low (also part of a small triangular price structure).
That price area can be watched for signs of resistance along with the 2,874 target which completes a 227.2% extension of a moving ABCD pattern starting from the September 2022 low. Because the higher price level is derived from a larger pattern (covering more time), it can potentially be more significant.
A bearish correction could test support at the 20-day MA
If a correction occurs before new record highs, the key short-term support is at Thursday’s small swing low of 2,736. A correction to test support around the 20-day MA is possible while maintaining the bullish price structure. Note that an uptrend line and the 20-day line have converged to mark the same price today at 2,682.
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