Gold Price Forecast: Failed Breakout Signals Possible Extended Consolidation

Gold ended Wednesday with a bearish reversal day following a rally to 2,480. Selling pressure then led to a pullback and a weak close in the lower half of the day’s trading range. The pullback continued today, Thursday, with a new lower daily low of 2,432. The 2,480-price level was the area of resistance near the 2,484-record high. It marked the initial 100% target for a long-term rising ABCD pattern that began in August 2018.

Failed Symmetrical Triangle Breakout Awaits Another Try

Yesterday’s rally was a failed attempt to break up from a symmetrical triangle consolidation pattern forming near the top of the bull trend. Although another bull breakout from the pattern towards new record highs may occur, it would also not be surprising to see gold spend more time within the triangle pattern first.

Building up energy in demand during further consolidation may better prepare it to challenge the current record high and sustain a rally to new highs. This means that a test of the lower boundary of the pattern is a possibility. Even if it is not reached, it increases the chance for a deeper pullback.

Key Near-term Support at 20-Day MA (2,418)

If gold can retain support at or above the 20-Day MA, it will be showing greater strength than a dip to the bottom of the triangle. It is currently 2,418. Close by is the 61.8% Fibonacci retracement, which can be watched along with the 20-Day line as a price zone. The 50-Day MA at 2,380 can be watched for possible support along with the lower boundary line.

Rising ABCD Pattern has 2,543 in Site

Rather than stay longer within the triangle consolidation, gold could break out sooner following a minor pullback or consolidation. A decisive rally above Wednesday’s high of 2,480 will trigger a bullish breakout. The prior record high of 2,484 should then be easily exceeded if the advance is sustained. If a bull breakout is sustained, then the first new high target is shown on the chart at 2,543. That pivot completes an initial target for a rising ABCD pattern that begins from the June 26 swing low of 2,294 (A). For future reference, the estimated minimum target from the symmetrical triangle formation is 2,605.

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