Momentum Slows Near Key Extension Level

Despite new record highs, a slowdown in momentum is indicated by the three narrow range days at the top of the trend. Friday’s advance broke above a 127.2% extension target at $4,516. That was a potential resistance zone, but it only stalled the ascent by a couple of days. A 161.8% measured move projection (AB = 161.8% of price change in initial AB leg) is next in line at $4,578 as a possible upside target. However, given a breakout above the 127.2% extension, the 161.8% extension of the October bearish correction becomes a potential target at $4,687. That level is bounded by a 350% measured move projection at $4,664 below, and a 423.6% extension at $4,713, which is from the long-term correction that followed the 2011 peak of $1,921.

Confluence Zone Acts as Upside Magnet

This $4,664 to $4,713 price range is highlighted since the range includes two long-term indicators and the three price levels are relatively close together. It is the confluence of indicators pointing to a similar price zone that seems to sometimes act like a magnet for price. Strength indicated by this week’s new high breakout will confirm with a strong weekly close today. Moreover, the price of gold is following through to new highs on the second breakout above a rising trend channel. The channel shows symmetry in the uptrend. A sustained advance above the top of the channel shows a new leg higher at elevated momentum. If sustained, it could be the early part of a possible blow of phase where momentum could spike.

Pullbacks Highlighted as Key Decision Zones

Nevertheless, the bullish indications are sure to be noticed by investors and draw attention to pullbacks that can be watched for setups to enter the trend. The recent new high breakout level at $4,381 and the 10-day average, also at $4,381 but rising, present the first more significant potential decision zone.

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