Gold in Early Stages of Bullish Reversal

Gold Forecast Video for 05.07.23 by Bruce Powers

Gold trades inside day on this U.S. Independence Day holiday. Activity is subdued due to the U.S. holiday, yet gold managed to find resistance of the down trendline. Next, we need to see a daily close above the line and above last week’s high of 1,933 for confirmation of strength. However, potential resistance around the 34-Day EMA is close by at 1,944. Clearly that line was resistance during most of the recent consolidation phase beginning in mid-May. Therefore, a daily close is needed above the 34-Day line for confirmation of strength that could lead to upside follow-through.

Bullish Hammer Pattern Last Week

Last week completed a bullish hammer candlestick pattern. It shows sellers pushing price down earlier in the week as bearish sentiment reaches a climax, then by the end of the week the bulls were back charge leading to a close in the top half of the week’s trading range. The bullish hammer pattern occurred at support of the 200-Day EMA, a logical area to complete the correction. Yet, gold remains in a downtrend with little confirmed signs of a bullish reversal.

Rally Above Last Week’s High is Bullish

One such sign happens on a rally above last week’s high of 1,933, with strength confirmed on a daily close above that high. At that point, gold is more likely to have completed the correction and is ready to continue its rising trend. It is interesting to point out that if there is a rally above last week’s high, it will be the first time that a prior week’s high has been exceeded in nine weeks, since before the correction began. Once a trend begins it tends to continue for a while. A new weekly bullish signal should be the first step towards a continuation of the larger uptrend with a daily close above the three-week high of 1,959 providing another confirmation of strengthening on a weekly basis.

Recent Lows Should Hold as Support

Alternatively, if gold heads back down before rising above last week’s high, then it may be planning to test recent support. A drop below today’s low of 1,919 would be the first sign of weakness. Recent support of the downtrend was at 1,893 and the 200-Day EMA is currently at 1,897.

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