Gold Price Forecast: Bullish Momentum Retained

Gold is on track to complete bullish doji hammer inside day today with a high of 2,418 at the time of this writing. Trading continues near the highs of the day heading towards Friday’s close. Today’s price action is constructive for the advance as it follows a strong candle yesterday with a close near the high of the day. The 20-Day MA is about to confirm strength as it has converged with the 50-Day MA and is about to cross above it. In addition, both moving averages have converged with a trendline, and they are about to cross above it. Each would provide an additional sign of improving demand.

Potential for Bull Breakout of Inside Day

The inside day sets up a potential upside breakout on a rally above today’s high. Thursday’s high was around 2,425 and will be the next key level as a breakout above it triggers a continuation of the rising trend. The hammer characteristics of the inside day show continued bullish demand. Moreover, today’s price action is largely in the upper half of yesterday’s trading range. That shows strength relative to Thursday’s price range. In addition, Thursday’s closing price of 2,415 is the third highest daily close for gold on record, another sign of strength.

Above 2,425 Signals Trend Continuation

A sustained breakout above this week’s high of 2,425 triggers a continuation of the bull trend. Gold must then rise above the 2,431-swing high from April 12. It then heads towards the record high of 2,450. Given the variety of bullish indications lately, it has a good chance of breaking above 2,431.

Eventual New High Targets of 2,462 and 2,480

The initial two new high price targets are at 2,462 and 2,480. A long-term extended 161.8% retracement target from the decline off the August 2011 high identifies the first price level. That price level is followed by the completion of a long-term rising ABCD pattern at 2,480. Those price levels are followed by a Fibonacci confluence zone around 2,489. That is where two or more Fibonacci levels congregate.

Regardless of the above bullish scenario, sometimes markets don’t make it so easy. If that happens with gold, we may see resistance leading to a retracement prior to a breakout to new record highs. Just an alternative scenario to be aware of in case it occurs.

For a look at all of today’s economic events, check out our economic calendar.