Gold futures extended gains once again, but will we see another fresh peak?
Technical Picture of Gold
Let’s start today’s Quick Gold Alert by quoting yesterday’s edition:
The first thing that catches the eye on the daily chart is the breakout above the upper border of the red consolidation (…)
What does it mean for gold futures?
A potential pro-growth scenario, which could take the price to the barrier of $2,800 or even to around $2,825, where the size of the upward move would correspond to the height of the mentioned red consolidation.
From today’s point of view, we see that the situation developed in accordance with the above scenario and the bulls reached the first mentioned target earlier today.
Thanks to this price action gold futures also hit another fresh all-time high peak of $2,801.65.
Additionally, yesterday’s daily closure above the Oct. 23 peak (the upper border of the formation) deprived the sellers of a valuable ally - the pro-declining bearish engulfing formation, which translated into a higher Wednesday’s open and formed a small green gap ($2,781.10-$2,786.90) that serves now as the nearest support.
How did this price action affect the 4-hour chart?
Before I answer this question, let’s recall the quotes from yesterday’s alert:
(…) today’s price action took gold futures not only above the upper line of the brown consolidation, but also above the upper border of the pink rising channel and the brown rising wedge, which suggests (at least) a test of the previously broken red resistance line (based on Aug. highs, which was strong enough to pause the bulls earlier this month) at around $2,780 (the first upside target).
However, taking into account the above-mentioned breakouts above all three formation, we could see an increase to around $2,786, where the size of the upswing would correspond to the height of the brown consolidation (the second upside target). At this point, it is also worth noting that in this area there is also 127.2% Fibonacci extension (based on the Oct. 23 intraday high and low), which serves as the technical resistance. Therefore, it’s worth keeping an eye on the bulls’ behavior in this area – especially when we factor in the proximity to the previously broken lower border of the very short-term grey rising trend channel (currently at around $2,787.30), which could lure the sellers to the trading floor.
Nevertheless, if all these resistances do not manage to stop the running bulls, we’ll likely see a test of the barrier of $2,800, where the size of the upward move will correspond to the height of the above-mentioned pink rising trend channel.
Looking at the above charts, we see that the bulls broke above the first two upside targets with ease and climbed to very important resistance zone (marked with the red ellipse) created by the above-mentioned barrier of $2,800, the upper border of the brown rising trend channel, the previously broken lower border of the very short-term grey rising trend channel and the 200% Fibonacci extension (based on the Oct. 23 intraday high and low).
Additionally, the Stochastic Oscillator generated a sell signal, while the CCI is very close to do the same, which suggests that reversal and lower prices are just around the corner.
If that's the case and the aforementioned zone will lure the bears to the trading floor, we’ll see a correction of the recent upward in the very near future.
How low could the gold futures go?
In my opinion, the first downside target will be the previously broken red resistance line (based on the Aug. highs, which is currently at around $2,782.
What’s next?
If it withstands the selling pressure, we could see one more attack on the barrier of $2,800 and the red resistance zone.
However, if the sellers manage to push the price below it, the next target will likely be the lower border of the brown rising trend channel (currently at around $2,775), which together with the previously broken Oct. 23 peak of 2772.55 and the upper border of the pink rising channel creates the first support zone.
The result of the battle fought here will decide the direction of the next move.
Why?
Because, in my opinion, as long as there is no invalidation of the breakout above the Oct. 23 peak (and the price remains above the red consolidation seen from the daily perspective) another attempts to move higher (and even a fresh peak) can’t be ruled out.
But what would happen if the bears managed to push the price lower?
In this case, it would come to invalidation of two important breakouts, which would likely accelerate the decline and trigger a downward move to the lower border of the pink rising channel or even the last week’s lows and the lower border of the red consolidation (marked on the daily chart) in the following day(s).
Summing up, gold futures hit a fresh all-time peak and tested the strength of the barrier of $2,800, which together with the resistances marked on the 4-hour chart creates the first important resistance zone that blocks the way to higher prices at the moment of writing these words. Additionally, the current position of the 4-hour indicators suggests that reversal and (at least) a shallow correction of the recent upward move should not surprise us in the coming day(s).
Have a profitable day, and see you tomorrow.
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Anna Radomska