Near-Term Resistance Defines Bullish Reclaim Zone

The three-day high at $4,404 is key near-term resistance since a sustained rally above that level could lead to a continuation of the long-term bull trend. Sustained trade above that high would have gold back above the prior trend high of $4,381 from October and the 10-day average, now at $4,393.

Even though a potentially bearish inverted hammer will complete for Friday, a higher daily high and higher low was established for the first day in four. This shows a degree of support that shows the potential for further strengthening. If gold stays above Wednesday’s low of $4,274, a higher swing low is established. It takes on greater significance since it is aligned with the 20-day average.

First Pullback Tests Post-Breakout Structure

Gold is in its first pullback following a new record high breakout in late-December to $4,550. Dynamic support was seen near the 20-day average since mid-November and is being tested once again. The price area near the 20-day line is also indicated as possible support by a top trend channel line. A second upside breakout of the channel was sustained in December, leading to a new trend high. So, the current pullback is both the first since the new trend high and for the channel breakout.

Upside Targets and Downside Risk Levels Identified

The expectation is that support will hold, leading to further strengthening. Above $4,404 and gold targets a $4,516 to $4,578 price zone for potential resistance. On the downside, a break below $4,274 eliminates a higher swing low and puts the 50-day line in site at $4,180.

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