Gold’s Consolidation: Bullish Continuation or Impending Correction?

Gold Forecast Video for 03.11.23 by Bruce Powers

Gold continues to consolidate near trend highs, with Thursday’s trading occurring within yesterday’s range. Volatility has been muted since the first trend high of 1,997 was hit last on October 20 with gold beginning to form what looks like the beginnings of a rising channel. If so, then a continuation higher should come soon. Alternatively, it fails to advance and leads to a deeper correction.

Retracement To Date Has Been Mild

So far, the correction in gold has been mild, not even reaching the minimum 23.6% Fibonacci retracement at 1,962. This reflects strong underlying demand in the near term. The stage is set for a continuation higher, but first a breakout above todays inside day high of 1,991 needs to trigger and then confirm strength on a rally above the two-day high of 1,993.

Next Upside Targets Start at 2,024

The next upside targets are in a price range that sits a little above the prior trend high of 2,009 from 2,024 to 2,041. First up is the completion of a 78.6% Fibonacci retracement at 2,024 and an earlier record high from August 2020 at 2,031. It is supported by two extensions or greater than 100% retracements of the two most recent downswings. One, starting from the July swing high and the other beginning off the September 1 swing high.

Deeper Correction Could See Gold Fall to 1,933

Smaller rising channels as with rising wedges tend to break down. Not always, but enough to highlight that caution is needed as we move forward in the near term. Regardless, the existing channel is in its infancy and can easily continue to rise as it forms before a bearish breakdown, if that is how it resolves. Nevertheless, a drop below today’s low of 1,979 is short term bearish and may lead to a test of support at the two-day low of 1,970 and possibly a break below it. If that occurs, then the areas to watch for support start with the 23.6% Fibonacci retracement at 1,962.

Further down is a key price zone derived from prior swing highs from 1,953 to 1,947. However, a common minimum Fibonacci retracement is 38.2% and it is at 1,933. It is supported by the 50-Day EMA (orange) at 1,931.

For a look at all of today’s economic events, check out our economic calendar.