Risk of Being Overbought
Keep in mind that gold has been advancing in the current upswing (CD) since the 2,582 (C) swing low. At today’s high gold had advanced by 203.63 points or 7.9% from 2,582. On a percentage basis that gain is slightly above average for five prior sequential upswings that occurred since the beginning of May 2024. Those are measured moves that had gains ranging from 7.08% to 8.65%.
On that basis alone gold may continue to see short-term resistance that leads to a pullback before it clears above the current high. Nonetheless, if a breakout above 2,790 occurs prior to a pullback gold is at risk of losing steam shortly thereafter as upward momentum began to accelerate following the minor interim higher swing low in January and the subsequent reclaim of the 50-Day MA.
Breakout Above 2,790 Targets 2,823
A sustainable rally above 2,790 has a chance of reaching the next higher target that looks to be around the 127.2% extension of the current rising ABCD pattern (purple) at 2,823. The 100% target was hit today at 2,772 and gold plowed right through it. Further up is the 127.2% extended target for a rising ABCD pattern that begins from the February 12 swing low (also part of a small triangle price structure).
That price area can be watched for signs of resistance along with the 2,874 target that completes a 227.2% extension of an advancing ABCD pattern that starts from the September 2022 swing low. Since the higher price level is derived from a larger pattern (covers more time) it has the potential to be more significant.
Bearish Correction Could Test Support at 20-Day MA
If a correction occurs before new record highs, then key near-term support is at the minor swing low of 2,736 from Thursday. A correction to test support around the 20-Day MA is possible while retaining the bullish price structure. Notice that an uptrend line and the 20-Day line have converged and are marking the same price today at 2,682.
For a look at all of today’s economic events, check out our economic calendar.