Bullish Trend Structure Remains Intact

Gold remains clearly bullish, with a bounce off the 10-day average providing a short-term indication that the buyers remain in charge. Key support is at the recent low of $4,274 as it generated a higher swing low. Remaining above the 10-day line will show sustained short-term strength but a pullback to potential support near the 20-day average, currently at $4,377, would not change the bullish posture. It is just that holding above the 10-day average shows slightly more strength.

Rising 20-Day Average Signals Improving Demand

The rising 20-day average is starting to breach the prior trend high of $4,381. That behavior shows improving underlying demand. Once the 20-day line reaches price again, volatility should improve with an upside continuation above the high of $4,500. Of course, this only applies if the 20-day line touches price before the breakout. An upside breakout can also occur before the average touches price. Gold should continue to hold above dynamic support near the 20-day line if it is to have a chance at a new record high above $4,550.

Monthly Candlestick Warns of Possible Near-Term Consolidation

Despite the bullish trend structure, a potential monthly bearish shooting star candlestick pattern completed in December. Even though the pattern is invalid until there is a breakdown below December’s low of $4,164, it reflects the potential for downward pressure as gold attempts to strengthen in January. A similar situation in the months of October and November resulted in an upside resolution as the monthly pattern never validated with a breakdown. October ended with a shooting star monthly pattern, followed by an inside month in November. Therefore, further short-term consolidation could occur before momentum kicks in to lead gold to a new record high.

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