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Price Reaching Overbought
Certainly, the price of gold looks to have gotten extended and is due for a correction of some degree. Both the intraday pullback today and the completion of an ABCD pattern target, point to that conclusion. Moreover, the relative strength index (RSI) momentum oscillator reached an overbought of 76.50 today, like the 77.24 overbought reading listed at the minor interim swing high from late-September 2024.
Resistance Seen Following Day’s High
Overall, gold showed strength during Wednesday’s advance as it rose beyond lower targets, as noted above. Nonetheless, prices can go only so far before they are due for a price correction in a retracement. To what degree that might occur remains to be seen. And there is little sign of it yet. The upswing from the $2,582 swing low (C) completed a $300 or 11.6% rally as of today’s high at $2,882.
That level of performance exceeds the previous six rallies, which peaked at 8.6%. However, it is interesting to note that as gold was rising out of a base following the October 2023 lows, it did see similar stronger rallies, from 10.6% to 17.8%. Does the current 11.6% advance point to further strong momentum as the next leg up in the long-term bull trend begins?
Key Support Starts at $2,840
Further weakness is likely if there is a drop below today’s low of $2,840. The recent new trend high breakout level at $2,790 will then provide the first more significant potential support area. Also, this week’s low at $2,772 is a potential support level, assuming it is not broken before this week ends.
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