Gold Price Forecast: Volatility Compresses as Bull Pennant Pattern Emerges

Gold Forecast Video for 01.05.23 by Bruce Powers

Volatility compresses further as gold trades inside day as it again tests recent support. This follows nine days of narrow range sideways consolidation. Once again, it looks like gold could close at or above the small uptrend line at the bottom of an ascending parallel trend channel. If so, today would be the sixth day out of eight that gold fell below the line intraday, but then closed above it. One of the things to watch going forward is when this pattern relative to the lower channel line changes. A change of the relationship could be a precursor to larger moves in gold, either up or down.

When Might Gold Start to Move?

Could the most recent prior consolidation pattern provide additional insight into when gold might start to move again? Let us look. The prior consolidation pattern was a bull pennant (small symmetrical triangle) that began from the March 20 swing high and ended the day before the upside breakout on April 4. Recently, gold has also been tracing out another small triangle consolidation pattern. In this case though the meaning of the current pennant is a bit different than the first as it is not preceded by a pole (sharp fast advance).

Notice that the advance prior to the first consolidation pennant was sharp and quick, thereby creating the pole to go along with the pennant. During that rally gold advanced by 11.1% from the trend bottom to the top of the March 20 high. That strong move was in only eight days.

Small Triangle Pattern Could Reveal Timing

The first pennant formed over 11 days and broke out on the 12th day, while the current pennant is now in its 10th day. This means that on Monday the time taken to form for the second pennant will match the first. Therefore, will a breakout occur on Tuesday? Certainly, it is not unusual to see symmetry in price in markets, but it also occurs in time. Here is one example where time symmetry could play out. Symmetry, meaning similarity in price and or time between two different patterns or swings in a market.

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