Gold Price Forecast: Poised for Pullback Before Potential Bullish Breakout

This week is set to complete an inside week for gold. Friday was the third day in a row of lower highs and gold is on track to end the day in a weak short-term position, below yesterday’s low and it is set to close in the lower quarter of the day’s range. Further, it may close today’s session below yesterday’s low.

Low Volatility Prolongs Uncertainty

Given the lack of momentum as gold has been consolidating in a tight range for 10 days, it looks like it may dip again to test support around the top of a symmetrical triangle pattern. The most recent minor swing low of 2,471 along with the 20-Day MA at 2,474 can be watched along with the top line of the triangle (purple). If the top of the triangle fails to hold as support a test of the lower 50-Day MA may occur. It is currently at 2,421 and can be watched along with an internal uptrend line.

Waiting for Follow-though After Bull Breakout

Gold trigged a breakout of a symmetrical triangle into new record high two weeks ago. And it was confirmed by a daily close near the highs of the breakout day and at a new record high. Volatility has since diminished resulting in a 10-Day price range from 2,471 to 2,532. If it can’t get going soon there is an increasing likelihood that another pullback lower may come before momentum returns.

Inside Week Sets Up

The highest price for gold this week was 2,529 and it provides an initial price level to signal an upside breakout that could see a bullish continuation. An inside week represents consolidation on that time frame. Gold is set to complete the month in a bullish position, above the halfway point of the month’s trading range. Not as strong of a bullish indication as it could be but still bullish, nonetheless.

Bullish Above 2,532

A rally above the August high of 2,532 will signal a continuation of the bull trend. There is an initial upside target at 2,566, which comes from a long-term indicator. An extended target of a large rising ABCD pattern completes there. There could be signs of resistance once reached or gold could continue higher to complete a small ABCD pattern (purple) at 2,595 and possibly reach the initial target from the symmetrical triangle pattern at 2,604.

For a look at all of today’s economic events, check out our economic calendar.