Gold Triggers Decisive Upside Breakout of Pennant Pattern, Confirms Strength

Gold Forecast Video for 05.04.23 by Bruce Powers

Gold triggers a decisive upside breakout of a bull pennant pattern (small symmetrical triangle). Strength was confirmed as gold easily exceeded both 2,003 and 2,010 highs. In addition, an 88.6% Fibonacci retracement completed at 2,018. Moreover, today’s rally also a triggered monthly breakout, further confirming strength.

False Moves Lead to Strong Moves

Today’s breakout followed a false breakdown Monday, where price first dropped below the lower boundary of the pennant. That didn’t last long though as gold managed to close near the high of the day, well within the pennant consolidation area, and at a seven-day closing high. Now, we want to continue to see signs of gold strengthening with only minor pullbacks. At this point, a drop below today’s low of 1,977 is showing weakness, rather than strength.

Flagpole Phase Points to Sharp Rally Ahead

The pennant triangle pattern was proceeded by an aggressive sharp rally of 11.0% rally in only eight days before price moved into consolidation. That rally is called the flagpole. During the consolidation/rest phase, gold started to trace out a small symmetrical triangle, referred to as the pennant. Following a short rest, strength seen in the prior rally can make itself felt again. In other words, there is the potential now to see another sharp rally in gold equal to or greater than the one before the pennant.

Price Target from Pennant

We can calculate a measuring objective from the pennant/flagpole pattern to arrive at a possible minimum target based on the pattern alone. Doing so points to a target of 2,158. In this case we are measuring the pole from the double bottom breakout area and adding it to the top border of the pennant.

Of course, the pennant target is at a new high for gold. If reached gold would have already broken out of a 12-year basing period. Other target can be derived from previous price action during the base, but those levels will be left for another time other than the closest. If we look at extended retracement of the most recent decline, off the March 2022 high, the 127.2% extension comes in at 2,194. That’s not too far from the pennant target and deserves to be watched in the future.

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