Gold Price Forecast: Breaks Resistance, Eyes Further Gains

Buyers stepped up on Wednesday to help push the price of gold to a new trend high of 2,390. A bullish breakout triggered on the weekly chart on a move above last week’s high of 2,378. At the time of this writing the high of the day is 2,390. Today’s advance took gold back above a top channel line, which has been tested as resistance several times in the past few weeks and it provides another sign of strength for the precious metals. It doesn’t hurt that silver has also shown signs of continuing higher (not shown) as it rapidly approaches the high for the year.

Next Higher Target Zone is 2,398

Next, gold faces potential resistance around the 78.6% Fibonacci retracement at 2,398. That price area also marks a top channel line. An advance through 2,398 will put gold back above both rising parallel trend channels following a failed breakout in early-April. A recovery following a failed breakout initially sets the stage for a continuation of the trend into higher prices. The first upside target is the trend high of 2,431. If a bull trend continuation signal is generated on a decisive rally above 2,431, the next higher target is at 2,431. Two Fibonacci levels mark that spot.

Second Channel Breakout Attempt

If gold advances above the top channel line and stays there, and then further strengthens, it will confirm strength. The advance to date has seen the price of natural gas appreciate at a rapid pace. A steep angle of ascent represents strength but also increases the risk for a sharp retracement. A daily close or more above the channel will go a long way to satisfying the bulls.

Long-Term Outlook is Bullish

As discussed more than once before, gold is in the process of following through on a bullish breakout above a multi-year base building period. Today’s advance triggered a breakout of the downtrend line and last week’s high. It shows buyers getting aggressively interested in gold as global uncertainty in government broadens. Moreover, a pullback remains a possibility if signs of weakness start to show up. The first sign of weakness that could lead to a deeper retracement would be on a drop below today’s low of 2,352.

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