Gold’s Bull Trend Intact Despite Minor Retracement

Gold Forecast Video for 10.04.23 by Bruce Powers

Following Wednesday’s doji candlestick pattern, gold pulled back to test prior resistance near the top of a bull pennant. So far, support was found at the 38.2% Fibonacci level as gold bounced from there. Whether that support area around Thursday’s low of 2,001 continues to hold remains to be seen.

Minor Retracement is Healthy for the Uptrend

A minor retracement off the trend high of 2,032 is healthy for the trend. However, a decline below the 61.8% (not shown for clarity) Fibonacci retracement at 1,099 puts the trend at risk of moving into a deeper retracement or consolidation phase. At that point gold would be falling below the lower trend line of the pennant.

A bull pennant is bullish, and we should therefore see upside momentum sustained following a breakout. Bouncing off the 38.2% support level is also bullish as that is a relatively minor retracement, and it reflects buyers being aggressive enough to keep the price of gold from falling further. Nevertheless, a dip to the 50% retracement at 1,991 is also possible. That price level is above the pennant pattern, so still a normal pullback, but of course not as strong as if price continues to rally off a 38.2% retracement support.

In other words, both a retracement to the 38.2% and 50% levels do not negate the bullishness of the pennant breakout signal. If gold falls below the 50% level however, the situation becomes more uncertain, while a drop below the 61.8% retracement level puts the pennant breakout at risk of failure.

Strong Breakout Earlier in Week

The pennant breakout occurred on Tuesday with a strong wide range green candle with gold closing near the top of the day’s range. That’s exactly what we would like to see on a breakout of a trend continuation pattern. If the retracement holds above the 50% retracement area an upside continuation is anticipated.

Upside Potential for Gold

A measuring objective can be calculated from the bull pennant to arrive at a minimum target following confirmation of the pattern via a breakout. The target is estimated at 2,158. Other price levels to watch on the way up include a 161.8% Fibonacci extension at 2,044, a prior high at 2,070, and Fibonacci confluence around 2,134.

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