Gold Price Forecast: Consolidates Between Major Moving Averages

Gold backed off on Friday having found resistance around 2,710. That price level is just below the key resistance area represented by the 20-Day MA, currently at 2,719. Notice that the 20-Day line has converged with the uptrend line and that they each mark a similar price area, more so than before Wednesday’s sharp decline.

Yesterday, support was clearly seen at a low of 2,643, thereby completing a successful test of both the 50-Day MA and 78.6% Fibonacci retracement. Although gold is down for the day, today’s narrow range day is contained in the top half of Thursday’s price range, reflecting minor short-term strength as the pullback today could have been more significant.

Range Bound Until Moving Average Broken

This week’s price action leaves the price of gold contained between resistance around the 20-Day MA at 2,719, and support at the 50-Day MA at 2,643. This may lead to further consolidation between the two moving averages or a move through one of the price levels.

Notice that the 50-Day line accelerated its angle of ascent around early-October. It began to rise away from the internal trendline, which is also a lower parallel channel line. That behavior is consistent with a rise in demand and improving bullish momentum. Yesterday, was the first test of support at the 50-Day MA following the bullish reversal from the line on August 5.

Monthly Support at 2,602

The swing low at 2,602, which is also the bottom of a bull flag pattern, makes up the trend structure of higher swing lows. Therefore, a drop below it will show a change in that price structure and increase the potential for a continuation lower. Importantly, the 2,602-price low was also support for the month of October.

Strong Trend of Higher Monthly Lows

Since February, gold has progressed for nine months with a series of higher monthly lows and higher highs, other than June, which was an inside month. November is also shaping up as a possible inside month pattern. It looks like there is a good chance that gold may complete the month in a similar position. What this means is that the pattern of higher monthly lows defines strength of the uptrend and that a drop below a monthly low will be a clear change in the pattern. Once that happens the potential for a deeper retracement increases.

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