Gold Price Forecast: Bullish Breakout Signals Potential Upside Rally

Gold broke out to the upside on Thursday, reclaiming the 50-Day MA above 2,343 and triggering a breakout of the downtrend line. A subsequent daily close above each will confirm strength of the breakout. Also, watch where the day ends within the day’s range of 2,328 and 2,365. Moreover, today’s close will likely exceed the top trend channel line, which has marked an area of support or resistance since a bullish breakout above the line first triggered in early-April. Further, a bullish weekly reversal was triggered above last week’s high of 2,342.

Long-Term Bullish

The larger developing pattern in gold is the bullish breakout of a rising trend channel following a multi-year base breakout in early-March. The longer the base the greater the potential bullish move that follows. Gold gave a preview during the rally starting from the February 15 swing low that accelerated following the February 29 breakout of a symmetrical triangle trend continuation pattern. The advance from the swing low to the 2,450-record high from a month ago was 465.80 points or 23.5%. For reference, the four previous upswings were 17.9% and 28.8%, respectively.

Second Breakout May Hold

A second channel breakout attempt triggered today. Sometimes, a second breakout entry can prove to be more promising. Moreover, if the 2,287-swing low continues to hold as support then gold will have completed a relatively shallow retracement. Notice that the lows of recent price action remained near the top channel line, also a sign of strength. But it needed today’s rally first to determine whether a low has been reached. The area around the line retained support.

Retracement Should Be Complete

If today’s advance is followed by further strengthening, the retracement is likely complete. A rise above the most recent swing high of 2,388 will further confirm strength and a bullish reversal following the correction. It is the next more significant price level that needs to be exceeded. There are several initial targets heading into new record highs. For now, the 127.2% Fibonacci extension of the recent retracement will be the most likely near-term initial upside target.

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