Gold’s Near-Term Outlook: Will It Correct Before Moving Higher?

Gold Forecast Video for 18.04.23 by Bruce Powers

Gold further consolidates near trend highs as a small rising trend channel (ascending flag) develops. This pattern can precede a bearish move as it operates like a rising wedge. Moving forward, the 21-Day EMA can be watched for trend support along with the uptrend line at the bottom of the channel. Yesterday, following a decline gold found support at its 21-Day EMA, where it was rejected to the upside.

Uptrend at Risk

There is a bearish divergence currently with the relative strength index (RSI), where it is trending down while price remains in an uptrend. This indicates that momentum is declining. Many times, momentum can turn before price. In addition, last week’s candle pattern is that of a bearish shotting star, where price closed in the lower half of the week’s range, following a move to new trend highs earlier in the week.

As noted, a rising consolidation phase as indicated by a small ascending channel or flag can resolve itself to the downside. It is still early in its development and will need to be watched going forward. A daily close below the lower line provides the first sign of weakening, while a drop below a prior swing low support (uptrend channel price structure) gives a more confident bear signal. At this point the last swing low was at 1,947.

Previous Bull Pennant Evolves into Rising Channel

As was seen with the bull pennant pattern discussed previously, patterns can evolve into different patterns. Previously, a bull wedge pattern was discussed that broke out on April 4. Given the choppy price action since, rather than signs of a clear trend continuation, the near-term outlook on gold looks to have increased the chance for a correction prior to moving higher again. Notice that as the larger ascending trend channel develops gold moves from the bottom to the top of the channel.

If Gold Continues Higher

If gold continues higher before a deeper retracement, notice that it can move to new trend highs while staying within the parallel channel trendline borders. A daily close above the top trendline is needed for signs of a bullish breakout of the channel.

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