Closed gap, breakout and bulls’ next targets.
In today’s gold price forecast, I decided to share with you my insights from today’s Quick Gold Alert. Have a nice read!
Technical Picture of Gold
Let’s start today’s analysis by quoting the last Quick Gold Alert:
(…) gold futures started Monday with a small pro-bullish gap ($2,570.10-$2,572.60) that triggered further improvement in the following hours.
Thanks to the bulls attack the futures came back above the previously broken barrier of $2,600 and climbed above Thursday’s red gap ($2,578.70-$2,586.50), which together with the buy signal generated by the daily indicators suggests further improvement – especially if the bulls manage to close the day above the mentioned red gap.
The daily chart shows that the situation developed in line with the above scenario, and gold bulls finished Monday’s session above Thursday’s gap, depriving their opponents of a valuable ally.
Thanks to yesterday’s increase, the futures also closed the day above the barrier of $2,600, which, in combination with the above-mentioned technical improvement, translated into a higher Tuesday’s open. In this way, another green pro-bullish gap ($2,614.60-$2,616.35) appeared on the chart, encouraging buyers to push the price even higher in the following hours.
How high could the price go?
Before I answer this question, let’s recall the quotes from Monday’s alert:
(…) gold bulls closed ranks during European trading hours, which triggered another attack and a breakout above the 38.2% Fibonacci retracement (based on the Nov.7-Nov.14 downward move).
What does it mean for the futures?
In my opinion, further improvement and a test of the next resistance zone (marked with red) created by the 50% Fibonacci retracement (based on the Nov.7-Nov.14 downward move), Nov.12 and 13 peaks and the previously broken mid-Sept. peak of $2,627.10.
From today’s point of view, we see that the futures extended gains (as expected) and broke above the mentioned first resistance zone earlier today.
This positive development lured even more bulls to the trading floor, which resulted in a test of the 38.2% Fibonacci retracement (based on the entire Oct.30-Nov.14 downward move), which suggest that yesterday’s next target remains up to date also today:
(…) If this area is broken, the next target for the bulls will likely be the 38.2% Fibonacci retracement (based on the entire Oct.30-Nov.14 downward move) at around $2,638.34 or even the 61.8% Fibonacci retracement (based on the Nov.7-Nov.14 downward move marked with orange) at around $2,650.
At this point, it is also worth keeping in mind that the above-mentioned Fibonacci retracement is slightly below the previously broken mid-Oct. and Nov.7 lows, which together create the orange resistance area (marked with the orange rectangle).
On top of that, this resistance is currently reinforced by the red declining resistance line (based on the previous peaks), which together create the second resistance zone (marked with the red ellipse with 2).
Additionally, the 4-hour indicators moved even higher in their overbought areas, which suggests that the space for gains (at least in the very short term) may be limited and correction of the recent increases can’t be ruled out.
Therefore, in my opinion, increased vigilance when making investment decisions at these levels seems to be justified from the risk/reward point of view.
Summing up, gold futures finished Monday’s session above the previously broken barrier of $2,600 and the Thursday’s red gap, which triggered further improvement and the breakout above the first resistance zone (marked on the 4-hour chart). Although this is a positive development, the proximity to the next resistance area and the current position of the 4-hour indicators suggests that correction of recent increase may be just around the corner.
Have a profitable day and see you tomorrow.
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Anna Radomska