Gold Price Forecast: Poised for Breakout or Consolidation After Record High Test

Gold bounces to a high of 2,595 on Thursday as it retested Wednesday’s new record high of 2,600. Despite yesterday’s new record high, gold ended weak, with a reversal day and a close in the lower half of the day’s trading range. It set up a shooting star candlestick pattern with a high of 2,600 and a low of 2,547.

Subsequently, today’s advance shows a bounce inside Wednesday’s price range as gold attempts to recapture the 2,600-price level. It is interesting to note that the highest daily closing price for gold was 2,582 three days ago. It may close higher today.

Bounce Follows Bearish Reversal Day

A reversal day and a close near the lower half of the day’s trading range is not bullish behavior. It hints at a possible breakout failure, at least for the moment. If correct, gold could see a deeper retracement and consolidation before it is ready to proceed higher. A drop below yesterday’s low of 2,547 points to further weakness.

Gold triggered a bullish continuation of the long-term uptrend with an upside breakout five days ago. The breakout level was 2,532 and it marks key near-term support along with the 20-Day MA, now at 2,528. Notice that the 20-Day line has converged with an internal rising trendline and mark the same price zone. If the 20-Day MA fails to hold as support, further down is the 50-Day MA at 2,473.

Support Found From 38.2% Retracement

Nevertheless, yesterday’s pullback completed a 38.2% retracement of the near-term upswing, and we’re seeing a bounce off that zone. That is a short-term sign of strength that needs further confirmation. If gold busts through the 2,600 high, it will signal a possible bullish continuation of the uptrend. Since it would follow yesterday’s bearish one-day price action, gold could see a sharp advance as it would indicate a failure of a failed breakout. The next higher target zone starts around 2,650 and goes up to 2,660.

Week’s Closing May Provide Clues

Finally, there is one more day left to the week. Last week’s high was 2,586 and gold has traded above it and signaled a weekly continuation of the trend. A weekly close this week above last week’s high will provide a slightly more bullish indication than a weekly close below that high.

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