Gold Price Forecast: Pulls Back After Hitting Record High Amid Fed Decision

Gold spiked to a new record high of 2,600 on Wednesday following the U.S. Federal Reserve’s announcement that they would cut rates by half a percentage point. However, the rally was short-lived as resistance quickly kicked in once the new high was hit. Gold subsequently dropped sharply to establish a new low of 2,553 for the day. Today is a good example of spikes in volatility seen following Fed announcements.

Bearish Reversal Day Indicated

At the time of this writing, rather than close at a new record high, gold fell to a four-day low. It is set to end the day at either a three-day low or a four-day low. Either way, it looks like a deeper pullback is coming to likely test support around the breakout level of 2,532, a prior trend high. A little lower is the 20-Day MA and the internal uptrend line, which have converged.

The 20-Day line is at 2,522. It had been successfully tested as support for eight days prior to the breakout day last Thursday. This means it should act as support again on approached, if support is not seen higher. However, notice that the 20-Day line is approaching the horizontal line at 2,532 and may be nearer by the time the price zone is tested as support.

New Hight Reaches Two Targets Within a Range

Resistance was seen today within a previously identified potential resistance zone from 2,595 to 2,605. The first price level was the 127.2% extended target for a rising ABCD pattern (purple) and the higher price was the target derived from the recent symmetrical triangle pattern.

An upside breakout of that pattern triggered in mid-August. On Monday natural gas got close to reaching the resistance zone but didn’t quite make it. Given today’s bearish reaction once it was hit, leading to a one-day bearish reversal pattern, it looks like gold may retrace further or consolidate before the bull trend is ready to proceed.

Bull Trend Continues Above 2,600

Nonetheless, a bull breakout is triggered on a decisive move above today’s high of 2,600. Gold would then be heading towards the next higher potential resistance zone identified from 2,650 to 2.661. It consists of several targets from Fibonacci analysis and measured moves (ABCD patterns).

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