Gold Price Forecast: Faces Pullback After Reversal, Eyes Key Support Levels

Gold consolidated on Thursday to trade inside day. That follows a bearish reversal day yesterday that has the potential to lead to a deeper decline. The reversal day followed a new record high of 2,758 that was hit earlier in the day. Subsequently, sellers took control and drove the price down below the prior day’s low of 2,719, which is where gold closed the session. This is short-term bearish price action that typically leads to a pullback of some degree. The degree will help provide clues as to the underlying strength or weakness in gold.

Top Channel Line Stops Ascent

Notice that resistance was seen around the combination of a 250% extended retracement level at 2,754 and the top rising parallel trend channel line. However, given the potential for higher targets a bullish continuation above this week’s high is anticipated following a period of consolidation or a pullback. Gold recently broke out of a bullish flag pattern, after a final test of the 20-Day MA as support, on October 15.

A measuring objective from the flag formation points to an eventual target of 2,815. But it is not only the flag identifying that price area. There are two other Fibonacci measurements confirming the price area. One points to 2,797 and the other to 2,808. Together, the above price levels generate a potential upside target zone from 2,797 to 2,815.

Watching for Inside Day Breakout

A breakout of the inside day, either up or down, will point to the next direction other than a false signal. Today’s high or resistance was at 2,743 and the low was 2,714. More importantly, the high of 2,758 and low at 2,709 from Wednesday provide more significant price levels to gauge strength or weakness. Key support levels are the recent trend breakout area of 2,686 and the 20-Day MA at 2,670. Either could present strong support.

Above 20-Day MA Retains Bullish Outlook

As long as the price of gold stays above the 20-Day MA during a pullback, the outlook for gold remains bullish. If gold falls below the 20-Day line and stays there are continues to fall, the 50-Day MA at 2,594 becomes a target. Notice that that 50-Day line has been rising and is on track to converge with support at the bottom of the flag pattern, at 2,602.

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