Gold Price Forecast: Finds Support Near Key Levels, Eyes 20-Day Resistance

Gold fell to 2,643 on Thursday before finding support and bouncing. Support was found around the convergence of the 78.6% Fibonacci retracement at 2,642 and the 50-Day MA at 2,639. There is also support from the four-week low. Gold will likely end with gains for the day following a sharp decline through key support areas yesterday.

Today’s bounce is counter that trend and heading towards a test of resistance around the 20-Day MA, now at 2,717. This puts gold sandwiched between potential resistance around the 20-Day MA and support defined by the 50-Day MA. At the time of this writing the high of the day was 2,705 and trading continues near the highs of the day.

Might Today End the Retracement?

Certainly, today’s low could be the end of the bearish retracement for gold following last week’s record high of 2,790. First, gold would need to reclaim the 20-Day line and then this week’s high of 2,643. Until then, the potential for additional tests of support and a possible move lower may yet occur. The monthly low from October is at 2,602, and it is also the bottom of the recent bull flag pattern.

Bearish Reversal, Top of Channel

One reason for a possible lower test of support is the rising trend channel in gold. Resistance was seen recently at the top of the channel and a failed breakout. Therefore, a swing to the low end of the channel could be forthcoming. The lower trendline used only two points and it has not been approached since drawn following the August swing low. This would seem to increase the potential for such a move since the cycle typically sees a move to the other side of the channel once a reversal occurs from one side. Nevertheless, this only becomes likely if the 50-Day line support is broken.

The 50-Day MA has not been properly tested as support since it was reclaimed on July 3, other than for some quick tests shortly after the breakout. It therefore should have a good chance of retaining support, in this case particularly because the 78.6% retracement identifies a similar level as being potentially significant.

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