Gold Price Forecast: Breaks Out of Bull Flag, Eyes Record Highs

Gold further confirmed an upside breakout of a bull flag trend continuation pattern on Tuesday as it is on track to end the day at its second highest daily closing price ever. This follows a successful test of support at the 20-Day MA earlier in the trading session. Once the area of the 20-Day line was reached buyers stepped up and took back control. At the time of this writing gold is set to close strong, in the top quarter of the day’s trading range.

Bullish Price Action

Today’s price action puts gold in a good position to challenge the recent record high of 2,686. It broke out of the flag pattern yesterday but closed weak, down for the day and in the lower half of the day’s trading range. And, below the trend line. However, a recovery today confirms the initial breakout signal. Including the successful test of support at the 20-Day MA.

The 20-Day line has done a good job of identifying trend support since it was reclaimed with a wide range green candle on August 8 and therefore it should do so again. It almost failed to hold as support last week as Wednesday ended below the 20-Day line.

Subsequent price action will be key for providing clues as to the strength of demand and therefore the likely follow through from the breakout. Calculating a measuring objective from the flag pattern points to a potential initial target around 2,815. Whether it is eventually reached or not it points to likely further upside for gold if the bull flag breakout continues to progress.

Stage is Set for New Record Highs

The current trend high of 2,686 is not too far away and could be busted to the upside quickly. If the flag breakout follows-through as it typically might, a new record high could be reached in days. A continuation signal triggers above today’s high of 2,669 and further on a rally above a minor swing low contained within the flag at 2,670. If a new record high is reached gold would next be heading towards a potential resistance zone that begins around 2,724. The bull flag breakout would show signs of failure on a decline below last week’s low of 2,628.

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