10-Day Average Holds as Dynamic Support

Friday’s advance followed a minor pullback to test support near the 10-day average, after it was reclaimed on the first day of the year. That low developed into a minor higher swing low as of today. This is bullish behavior that shows the integrity of the trend and the potential to break out above the $4,500 record high if support levels are held. It would help to see some improvement in momentum now that support at the 10-day average was tested and a new high for the upswing hit.

Rising Channel and Fibonacci Support Confirm Strength

Strength of the bull trend was indicated recently with the higher swing low at $4,274, a bounce from the 20-day average, and a confirmation of support at the top of a rising channel that followed an upside breakout. A failed breakout of the channel triggered in October, leading to the recent pullback to $3,886. It is interesting to note that both the October decline and the late-December drop found support near the 38.2% Fibonacci retracement of prior upswings. In Fibonacci analysis, that is minimum anticipated pullback, and a sharp recovery is a sign of strong demand. The consistency indicates the underlying strength remains as gold heads toward a new record high.

Higher Resistance Zones Come Into Focus

Although it would be nice to see some momentum, it will be needed for a sustained rally above the current high. That advance would put the next higher resistance zone in sight, starting from $4,664 and up to $4,766. Both of those price levels are derived from long-term measurements, including a starting point in 2011.

Downside Levels to Monitor

On the downside, Thursday’s low of 4,408 and the 20-day average at $4,392 present potential short-term support levels. If gold stays above the 20-day line, it continues to point towards a new trend high. That is the key dynamic support indicator for the near-term uptrend.

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