Gold Price Forecast: Tests Key Support at Top of Symmetrical Triangle

Gold pulled back to a low of 2,471 on Thursday before finding support and bouncing intraday. The decline successfully tested support at the top boundary line of the symmetrical triangle pattern as price was rejected to the upside. A bullish breakout of the triangle consolidation pattern triggered last Friday. Even though the price of gold advanced further to a high of 2,532 this week there was a notable decline in momentum, subsequently leading to today’s pullback.

Typical Behavior of Price in an Uptrend

It is typical of an uptrend to pull back to test prior resistance areas as support following a bullish breakout. The ideal maximum pullback is to the top boundary line. If gold can reverse higher from here it should be able to continue to progress its uptrend, initially with a breakout above 2,532. This is typical for most breakouts.

The bull breakout of the symmetrical triangle occurred relatively early in its formation. That showed strength of the breakout and suggests support from the pattern may not be as strong as a breakout closer to the apex of the triangle would be. Nevertheless, the breakout is technically viable and points to higher prices for gold.

Lower is the 20-Day MA at 2,446

The top boundary line of the triangle will continue to mark an area of interest for buyers. Notice that given its declining slope the price represented by the line will be lower as we go forward in time. Nevertheless, a decline below the line will have gold targeting potential support at the 20-Day MA, currently at 2,446. Lower down and closer to the bottom of the triangle is the 50-Day MA at 2,399.

Weekly support was seen last week at a low 2,424 and it could represent support again if it is approached. There are also a couple of prior swing high levels that have been added to the chart with right horizontal black line. They are at 2,450 from May 20 and 2,431 from the swing high on April 12.

Below 2,446 Hints at Failure of Breakout

It should also be understood that the center horizontal of the triangle is around 2,446. That price level will have significance if approached as a drop below it puts the bull breakout of the triangle at risk of failure. A decline through the bottom boundary line would confirm a failure of the bull move.

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