Gold Price Forecast: Struggles Near Highs, Testing Critical Support Levels

Gold dropped to a low of $2,891 on Wednesday and thereby successfully tested support around the 20-Day MA, which is at $2,888 currently. An intraday bounce followed, and gold is back trading around the opening price, at the time of this writing. Nevertheless, bullish momentum has declined as gold consolidated near highs over the past couple of weeks. It is at risk of breaking below key trend support represented by the 20-Day MA, as well as an internal uptrend line. But the 20-Day line provides the more significant dynamic support levels.

Trend Support at Risk

Monday’s new record high of $2,956 completed a $373 or 14.5% advance when measured from the December swing low at $2,582. Notice that the angle of ascent of the trend steepened following that low and the subsequent reclaim of the 20-Day and 50-Day MAs. An upside breakout of a short resistance trendline also helped improve demand further. As the trend continued to rise following the December low, the rate of change in the price of gold increased. This dynamic can also be seen by the widening of the spread between the 20-Day MA and 50-Day MA.

Bearish Potential

The accelerated advance is contained within a rising trend channel that shows the underlying angle of ascent for the larger bull trend pattern. Therefore, a decisive trend reversal signal could eventually see a test of support around the 50-Day MA or the lower trendline. Notably, there is a bearish divergence in the relative strength indicator (RSI) and it is trending down following some time in overbought territory.

If 20-Day MA Fails, the 50-Day MA Becomes a Target

Following the reclaim of the two moving averages, there has not yet been a pullback to test those lines as support until today when the 20-Day MA was tested. If the 20-Day line fails to hold, the 50-Day line becomes a potential target. This doesn’t mean that it will be achieved, but it certainly could be.

Other price levels that could see support include the prior trend high at $2,790 and a lower previous resistance zone starting around $2,726. However, if it is reached it shows a failure of support from both the 50-Day MA and the uptrend line. That would be bearish and open the possibility of testing the lower trend indicators represented by the 200-Day MA at $2,579 and an uptrend line.

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