Gold Price Forecast: Recovery Eyes 50-Day MA Amid Bullish Momentum

Gold made further progress on Tuesday towards a test of resistance around the 50-Day MA, as it broke above Monday’s high and will likely close above it. The high for the day so far is 2,639 and the 50-Day line is at 2,656. Today’s advance also reclaimed the uptrend line and gold may close above the line, which would provide another sign of strength, although minor. Gold could have seen signs of resistance around the line but instead it didn’t look like it mattered as the day’s high of 2,639 was a little above the line.

Counter-Trend Rally Advances

It looks like gold completed a swing low with last week’s low of 2,537. A bullish reversal confirmed with yesterday’s strong advance. The swing low was around the 50% retracement and a prior top. Gold completed a 253 point or 9.1% correction at the low. That’s the biggest drop on a percentage basis since the May 2023 correction.

Even if the low is set for the correction, that doesn’t mean gold goes right back up to new highs. Of course it could, but the more likely scenario looks to be a rally of some degree to test prior support levels as resistance levels. Once resistance is found there will be a pullback and another attempt to reclaim the price level, or a reversal that falls to retest support levels.

Confluence Leaves Clues

One of the reasons that confluence is looked for in technical analysis is that it helps identify potentially stronger levels of support or resistance. Confluence is when two or more (preferred) price levels are identified by analysis near each other. This seems to act like a magnet for price sometimes. For gold, the price range from the confluence of various indicators highlights 2,684 to 2,692. There is the 20-Day MA at 2,684, a prior swing high at 2,686, and the 61.8% Fibonacci retracement at 2,692. If that price zone does act like a magnet, then gold will reclaim the 50-Day MA on the way up.

As for the bullish case for gold beyond the 20-Day MA, it first needs to close above the 20-Day line. Until then, the expectation is for some time to go by first, starting the current rally and test of possible resistance.

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