Potential resistance zone reached
Gold has been trading in a potential resistance zone since Tuesday’s advance hit targets for two bullish ABCD patterns marking a potential pivot level (purple, orange) around 2,661. Then a more recent and smaller (light blue) ascending ABCD pattern identified a target at 2,675 and that was reached today. The bullish momentum has since weakened intraday, opening the possibility for a temporary top.
A drop below 2,655 indicates weakness
A drop below the current low of 2,655 is a sign of weakening that could lead to a deeper pullback. Areas to watch for support on a pullback start with the 38.2% Fibonacci retracement at 2,633. However, a more important potential area of support is around the 50% retracement at 2,616, combined with this week’s low at 2,614.
Of course, a drop below the weekly low is a sign that sellers are allowing lower prices. Next, a pullback would be on the table to test the support at the last breakout level of 2,600. That price level is confirmed by the Fibonacci retracement of 61.8%, also at 2,600.
Decisive rally above 2,686 points to higher prices
Regardless of the possibility of a relapse, there are no signs of one yet. That is why the rally can continue. A decisive rise above today’s high at 2,686 will signal a possible continuation of the bullish trend. If the advance continues, gold has a chance to reach the next higher price zone identified on the chart, which starts at 2,724.
That price level completes the target for a long-term bullish ABCD pattern starting from the February low. There are several potential targets above 2,724, but the one that is more important because it is derived from a longer period is 2,754. It marks the 250% extended retrace of the decline from the March 2022 peak.