Countertrend rally progress
It appears that gold has completed a swing low with last week’s low at 2,537. A bullish reversal, confirmed by yesterday’s strong progress. The swing low was around the 50% retracement and an earlier top. Gold completed a correction of 253 points or 9.1% off the low. In percentage terms, this is the largest decline since the May 2023 correction.
Even if the low is set before the correction, that doesn’t mean gold will immediately go back to new highs. That could of course be the case, but the most likely scenario seems to be some degree of rally, testing previous support levels as resistance levels. Once resistance is found, there will be a pullback and another attempt to regain the price level, or a reversal that fails to retest the support levels.
Confluence leaves clues
One of the reasons why confluence is sought in technical analysis is that it helps identify potentially stronger levels of support or resistance. Concurrence occurs when two or more (preferred) price levels are identified by analysis as close to each other. This sometimes seems to act as a magnet for the price. For gold, the price range between the confluence of various indicators is between 2,684 and 2,692. There is the 20-day MA at 2,684, a previous swing high at 2,686, and the 61.8% Fibonacci retracement at 2,692. If that price zone acts like a magnet, gold will reclaim the 50-day MA on its way up.
As for the bullish case for gold after the 20-day MA, it must first close above the 20-day line. Until then, it is expected to take some time for the current rally to begin and potential resistance to be tested.
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