Gold Price Forecast: Rises to Challenge Resistance at 50-Day MA

Gold rose to reclaim the 20-Day MA on Thursday, before finding resistance around the 50-Day MA with the day’s high of 2,660. The 50-Day MA is at 2,659 and the 20-Day line is at 2,639, currently. During short-term weakness initial support may be around the 20-Day line and recent interim minor swing high at 2,639. Today’s advance completed an initial target for a small rising ABCD pattern (not marked) at 2,653, a little shy of the high for the day. Gold is set to close strong for the day, in the top third of the day’s trading range.

Higher Up is 2,688 Target Zone

If the 50-Day line can subsequently be reclaimed and the buyers stay in control, the next higher target zone of significance should be around the 161.8% extended target for the small ABCD pattern at 2,688. That price zone may take on additional significance as it coincides with a top downtrend line. That trendline marks dynamic resistance for the current bearish correction.

It also marks the top line of a parallel trend channel with the lower line connecting the November swing low (B). An earlier falling trend channel remains on the chart (blue dots) as a guide. Notice the prior four days found resistance around the initial top channel line.

Short-term Strength within Bearish Formation

Although the declining trend channel is larger than the current rally and therefore assumed to have a greater influence, gold did establish a higher swing low at 2,582 on December 19. By itself, that is a bullish sign that requires further evidence. Today, further evidence for improving demand occurred. However, it is short-term bullish price action that is a counter-trend rally within a larger bearish trend channel.

A sustained advance above the top channel line would show improvement that may lead to challenging the 2,726-swing high (C). Since that high was the second rejection from resistance, it would need to be reclaimed before there is a clear sign of a bullish reversal in gold and the potential for a continuation of the larger developing bull trend.

Drop Below 2,622 Signals Caution

Near-term support for gold is at today’s low of 2,622. Notice that the low is at support of the initial top channel line (blue dots). It is also near the resistance highs of the prior two days. Once prior resistance becomes support the potential for a continuation higher improves. Further, the weekly chart (not shown) shows support being retained around the 20-Week MA. Moreover, this week may end at the highest weekly closing price for gold in six weeks. The highest weekly closing price during that time was previously 2,650.

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