Will we see a successful breakout above the consolidation?
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:
(…) the combination of the resistances (marked on the daily chart) and the sell signals generated by the 4-hour indicators doesn’t bode well for the bulls and further improvement.
Therefore, if the sellers manage to invalidate the above-mentioned breakout above the green channel, we’ll likely see a comeback to (…) the previously broken lower line of the black channel.
If the combination of these supports fails to stop the bears, the way to the upper border of the purple consolidation ($2,603.70-$2,653.80) or even the lower border of the orange trend channel (currently at around $2,650.40) will be open.
At this point it is worth noting that the outcome of the battle fought here (the upper border of the purple consolidation) will decide where will the price head next in the very near future.
Why?
Because if the bulls manage to protect this support and the price bounces it off, they will receive a positive technical development – a verification of yesterday’s breakout above the formation, (…)
(…) However, on the other hand, if the bears show claws and manage to push the price below the upper border of the purple consolidation, we’ll see an invalidation of yesterday’s breakout, which will be a negative signal that will likely trigger further deterioration in the coming week.
From today’s point of view, we see that the situation developed in tune with Friday’s assumptions and gold futures move lower during yesterday’s session.
Looking at the daily chart, we see that Friday’s unsuccessful attempt to break above the upper border of the red gap ($2,668-$2,675.80) from Dec.16, 2024 and the 50% Fibonacci retracement resulted in a comeback to the previously broken lower border of the medium-term orange rising trend channel and the upper border of the pink consolidation.
Although gold futures finished the day above these important supports a pro-declining candlestick formation (the dark cloud cover) appeared on the daily chart. Additionally, the price failed to stay above the very short-term green rising channel marked on the 4-hour chart below.
From this perspective, we see that the sellers invalidated the earlier breakout above the upper line of the formation, which translated into a lower Monday’s open. In this way a small pro-declining gap appeared on the daily chart ($2,652.80-$2,654.70), which triggered further deterioration in the following hours, approaching the futures to the previously broken 61.8% Fibonacci retracement (marked on the daily chart) and the 78.6% Fibonacci retracement (based on the Dec.30-Jan.3 upward move).
The combination of these supports encouraged the bulls to close the ranks, which translated into a rebound that took the futures above the upper line of the green rising trend channel once again. In this way, the price also came back above the purple consolidation (marked on the daily chart) and approached the very short-term key resistances - the upper border of the red gap ($2,668-$2,675.80) from Dec.16, 2024 and the 50% Fibonacci retracement, which were strong enough to stop the buyers on Friday.
What can we expect next?
Taking into account buy signal generated by the 4-hour Stochastic Oscillator, it seems that gold bulls could try to push the price higher and break above the mentioned resistances later in the day.
If they manage to climb above the Friday’s peak, we could see a realization of the Thursday’s potential bullish scenario.
As a reminder:
(…) If the bulls manage to close today’s session above the upper line of the consolidation, we could see an increase to around $2,707 where the size of the upward move would correspond to the height of the formation. At this point it is worth noting that in this area gold bears have an important ally – the red gap ($2,704.90-$2,709.40) from Dec.13, 2024, which serves as a quite solid resistance.
Nevertheless, in my opinion, such price action and climb above the barrier of $2,700 will be more likely and reliable only if the bulls close today’s session above mentioned red gap. Therefore, in my opinion, keeping an eye on the bulls’ behavior around this key resistance can give us valuable clues about the next move. Why? Because any sign of their weakness could lure the sellers to the trading floor and trigger another pullback from here.
Summing up, gold futures failed to break above the second resistance zone on Friday, which translated into a correction of the recent rebound. Despite this price action, the combination of the Fibonacci retracements encouraged gold bulls to fight, which triggered a rebound that erased entire downward move and took the futures to the second resistance zone once again. In my opinion, the result of the battle fought here will decide where will the price head next in the very near future. Stay tuned.
Have a profitable day and see you tomorrow.
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Anna Radomska