Gold (XAUUSD) Price Forecast: Consolidation Sets Stage for Next Upside Move

Gold continued to consolidate on Wednesday in a relatively narrow range between $3,344 and $3,385. This is the second day of rest for gold following a double bull breakout above a trendline and lower swing high (B) at $3,366 on Monday. It was confirmed by a daily close above the swing high. Subsequently, a new rally high of $3,392 was reached yesterday while the low of the day held support around the trendline that previously represented resistance.

This shows strength being retained following the breakout and sets up a continuation of the trend on a decisive rally above $3,392. An earlier sign of strength would be in indicated on a rally above today’s high as it would trigger a breakout of an inside day.

Next Higher Target at $3,439

The next higher price level for potential resistance is at a lower swing high of $3,439. Nonetheless, a confirmed breakout above that level confirms strength and could lead to the next higher target. There is an upside target zone from $3,491 to $3,500, consisting of an initial target for a rising ABCD pattern and the current record higher for gold, respectively. If strength can be retained, leading to a breakout to new highs, the 127.2% projected target from the ABCD pattern becomes a potential target at $3,557. However, a little higher is the 127.2% extension of the recent bearish correction following the new record high in April.

Short-term Bearish Below $3,333

Regardless of the potential bullish implications of this week’s price action, a drop below Tuesday’s low of $3,333 would be short-term bearish and may lead to another test of support around the 20-Day MA, now at $3,293. Also, keep an eye on potential support around the internal uptrend line as well. Recently, the 20-Day MA was reclaimed and tested again as support at yesterday’s low. A retest of the line led to the launch of the bull breakout. This is bullish behavior and supports the continuation of the bull trend.

Weekly Resistance Challenged

This is the third week in a row where the $3,366 level is being tested as resistance. Therefore, upon a sign of continuation, the trend could accelerate to the upside as further strength increases the chance to eventually reach new record highs.

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