In today’s gold price forecast, I decided to share with you my insights from Wednesday’s Quick Gold Alert.
Have a nice read!
Bulls’ action, breakouts and the gap. Will we see further improvement?
Technical Picture of Gold
Let’s start today’s Quick Gold Alert with the quotes from yesterday’s edition:
(…) as long as Friday’s green supportive gap ($2,639.30-$2,647.25, [which is currently reinforced by the previously broken upper border of the orange channel]) remains open, the way to the next important support area (based on the Sept.18 peak, the 38.2% Fibonacci retracement and the last week’s lows) is closed and another attempt to move higher is likely (especially when we factor in the buy signal generated by the Stochastic Oscillator).
Looking at the daily chart, we see that the situation developed in tune with the above scenario and gold futures moved higher before the U.S. market open.
Thanks to yesterday’s increase the price came back above the upper border of the purple rising wedge, invalidating the earlier breakdowns under both lines of the formation.
This positive development also resulted in the formation of a quite big white candle which, together with the preceding black one, created a pro-growth formation – the bullish engulfing pattern, giving buyers a valuable ally in this area.
How did this price action affect today’s trading?
As you see, gold futures started Wednesday with another green supportive gap ($2,678.90-$2,679.40), which triggered further improvement and attack on the red gap from the beginning of the month (in line with the pro-growth scenario from Thursday).
What’s next?
In my opinion, yesterday’s quote remains up to date also today:
(…) as long as the red gap is open the way to the north is also closed, which means that another bigger move will be more likely and reliable only when we see one of the mentioned gaps successfully closed.
When we take a look at the daily chart, we see that the futures are currently trading above the upper line of the red gap ($2,684.80-$2,690.30), which means that if the bulls manage to close today’s session above this nearest resistance a fresh peak in gold might be just around the corner.
How high could the futures go?
Before we find the answer to this question on the 4-hour chart, let’s recall the quotes from yesterday’s alert:
(…) gold futures rebounded, creating a pro-growth candlestick formation (the bullish engulfing pattern), which suggests that another attempt to move higher may be just around the corner.
If this is the case, the futures will likely test the nearest resistance (the upper border of the pink declining channel, which is currently at around $2,680.97) in the following hours.
In my opinion, the result of the battle played here will decide whether we will also see an attack on the previously mentioned red gap (which remains the key resistance to watch) or a repeat of yesterday’s price action (another pullback).
Looking at the 4-hour chart, we see that gold futures extended gains (as expected) and attacked the above-mentioned upper border of the pink declining channel, creating a big white candle on the chart, which finished the day above the 61.8% Fibonacci retracement.
Although gold bears tried to go lower, the show of the earlier bulls’ strength lured more buyers to the trading floor, which translated into further improvement and the breakout not only above the channel, but also above the 78.6% Fibonacci retracement.
Taking all the above into account and combining it with the earlier breakout above the upper border of the red declining channel (marked with dashed lines), it seems that we could see another fresh peak in gold in the coming day(s).
So, how high could gold futures go?
In my opinion, if the bulls manage to close the red gap and break above the previous peak, their next target could be around $2,730, where the size of the upward move would correspond to the height of the red declining channel (marked with orange rectangles). At this point, it is also worth keeping in mind that slightly above this target is also the 127.2% Fibonacci retracement, which serves as an additional resistance there.
Nevertheless, please keep in mind that this scenario will be more likely and reliable only if the bulls manage to hold the price above the red gap, which is the key area to watch at the moment.
Summing up, yesterday, gold futures invalidated the earlier breakdown under both lines of the purple rising wedge, creating a pro-growth bullish engulfing pattern on the daily chart. These positive developments resulted in a higher open and formed another green supportive gap ($2,678.90-$2,679.40), which combined with the picture that emerges from the 4-hour chart suggests that further improvement might be just around the corner. Nevertheless, please keep in mind that the pro-bullish scenario will be more likely and reliable only if the buyers manage to close the day above the red gap, which is the key resistance area to watch.
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Anna Radomska