Gold trades inside day on Tuesday following a test of lower support on Monday. On Monday gold fell to a low of 2,015 thereby testing support at the lower boundary line of a small pennant consolidation pattern (purple). Support was seen off that low leading to a bounce and a likely higher close for Tuesday. Where gold closes will leave a clue. At the time of this writing gold is set to close above resistance represented by the top of the pennant, and the 20-Day (purple) and 50-Day (orange) MAs.
The high of the resistance range is set by the 50-Day line at 2,034. Therefore, a close above that level will provide a clear sign of strength that should lead to higher prices. Monday’s bearish behavior that tested support levels should be negated at that point.
Bullish Reversal Setting Up
Once Tuesday’s session ends gold will get a bullish signal on a rally above today’s high, 2,039 currently. That should complete a two-day throwback to the lower pennant support area. Further strength is then indicated with a rally above last week’s high of 2,065. The next primary target will then be the completion of a rising ABCD pattern at 2,117 (D). An interim target where resistance of some degree might be seen is around the prior swing high of 2,088 (B). Moreover, a monthly bullish signal triggers on a decisive rally above January’s high of 2,079.
Once Price Firms, New Highs in Sight
A bullish reversal off yesterday’s low has a good chance of leading to new record highs in the precious metals. Several false breakouts to new record highs triggered since August 2020 but each time the price of gold hit resistance leading to a correction of some months. For the current advance, it is starting a higher swing low than in previous attempts. Further, the price structure of the progression of the uptrend is pointing to higher prices.
50-Day Moving Average is Key Trend Indicator Going Forward
Going forward, a key trend indicator is the 50-Day MA. It has held up as support during several tests since November, including recently. However, the recent test is not complete until gold rises away from the 50-Day line. It has not yet done that and therefore the risk of further tests of support remains.