Gold Price Forecast: Rally Eyes Record High After Bullish Breakout

Gold rallied today and triggered an extension of the rising trend to reach a high of 2,425. Momentum has since died down intraday, but buyers remain in control with trading continuing near the highs of the day at the time of this writing. The rally completed a 78.6% Fibonacci retracement at 2,415. Although there are signs of resistance around the 79.6% level the pullback has been mild so far.

If gold can close strong today, in the upper quarter of the day’s trading range, it has a chance to continue to rally into the end of this week. Also, watch the relative closing price. There has been only one day that gold closed above today’s high and that was on May 20, the day gold hit its current record high of 2,450. A strong close today sets the stage for gold to recapture the record high and keep rising.

Strong Upward Momentum May Challenge Record High

The next higher potential resistance area is around the April 12 swing high at 2,431. There is also an 88.6% Fibonacci retracement level at the same price level adding to its potential short-term significance. Since the bull breakout last week gold has maintained strength above prior resistance areas defined by the downtrend line, top trend channel line and the 50-Day MA (orange).

Today’s rally further confirms improving demand in the precious metal. The question is, can upward momentum be sustained enough to take gold above the 2,450-record high or will it first encounter resistance that leads to a retracement or consolidation phase first.

20-Day MA Bull Crossover in Process

Further confirming strength of the uptrend will be the 20-Day MA (purple). It is more sensitive to changes in price since it uses a shorter period to calculate, and it is about to cross back above the 50-Day line since being below it from June 17. This will be another piece of evidence indicating that strength in demand is improving. Moreover, the 20-Day and 50-Day lines have come together more recently as gold consolidated and volatility died now. Now that a bullish breakout is in play the bull trend should be ready to reassert itself. This will increase the distance between the two moving averages as momentum improves and the uptrend extends.

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