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New Record High Leads to Pullback
The new high in gold on Thursday occurred near a previously identified potential resistance zone derived from the confluence of several indicator targets. Although gold rose above the $3,043 high that was the top of the price zone, it didn’t go much further before encountering resistance that stopped the ascent. As with all price levels, they should be considered as an area of potential price resistance or support.
Increasing Selling Pressure
Since today’s bearish reversal is clear and reached a three-day low, it seems that natural gas is signaling increasing selling pressure that will likely lead to a test of support at lower price levels. A maximum lower price target indicated by current analysis would be the rising trendline at the bottom of the current parallel trend channel (highlighted). It is around $2,924 today. However, the 38.2% Fibonacci retracement provides the first potential lower target at $2,792. After that would be the prior trend high at $2,956. Further down is the confluence of the 20-Day MA at $2,946 and the 50% retracement level at $2,945. Notice that since the 20-Day line is rising, it may converge with a higher price level before it is tested as support.
Rally Above $3,058 Improves Bullish Outlook
Short-term bearish indications will begin to be negated on a sustained rally above today’s high of $3,058. That could mean that gold had a one or a few days correction before rallying to continue its ascent. This could happen without gold going much lower. Of course, a sustained rally above today’s high has a good chance of leading to a new high breakout above $3,058. Gold would then be heading next towards the top of a rising channel along with a confluence target zone around $3,080.
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