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Gold Uptrend Faces Challenges
By: Bruce Powers | April 19, 2024

• Gold will complete the week with an inside weak, thereby setting price levels to signal either a move up or down next week.

Gold remains strong and in a clear uptrend, yet risks remain. It has been advancing in a rising consolidation pattern along support of the 8-Day MA since the pullback low on April 10. Bullish momentum has declined during this phase and gold has struggled to sustain a rally. It hit a five-day high of 2,418 today but is on track to close weak, in the lower half of the day’s range, at the time of this writing.



Fibonacci Confluence Zone Keeps Advance at Bay

Last week’s new record high of 2,431 found resistance at the top of an identified range of Fibonacci confluence, where targets of multiple measures line up. Given the subsequent bearish reaction on the same day it looks like the market recognized the resistance zone. The close was in the lower quarter of the day’s range following a new record high. That is not bullish behavior. Nevertheless, interest from buyers has remained strong as gold struggles this week to recapture that high. It has been unsuccessful so far.

Inside Week Sets the Stage

This week will end as an inside week, which is a form of consolidation on that time scale. Therefore, heading into next week a bullish signal would be indicated on a rise above this week’s high 2,418. If upward momentum is then sustained the record high will likely be challenged and possibly exceeded. The next upside target would be the 161.8% Fibonacci extension of the retracement of the large downswing starting from the August 2011 swing high at 2,457.

A 100% retracement completed at that high of 1,921 in July 2020. Further, a measured move completes at 2,480. Each measured move is marked with rising purple arrows on the chart. Since they cover a large time frame the 2,480 target has a good chance of eventually being reached and encountering resistance around that target.



Breakdown Leads to Pullback or Further Consolidation

On the downside, a bearish breakdown signals a drop below this week’s low of 2,324. The 8-Day line will be broken on a move below 2,368 and may provide a warning signal. Support may first be seen around the 20-Day MA, currently at 2,301, while the 50% retracement is nearby at 2,289. Rather than retracing it is also possible gold continues to consolidate near highs as it further prepares for a bullish continuation.

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