Trendlines Indicate Higher Prices for Gold
Of note is the relationship of the price of gold with two trendlines. The more significant line is the rising line connecting the recent May 3 swing low, as it covers a longer time frame than the second line. If gold stays above that line, it can be anticipated to continue to strengthen. Also, gold rose above the downtrend line starting from the April 12 record high of 2,431 yesterday, and it exceeded the prior trend high at 2,378 as well. Wednesdayβs close was above both the line and prior trend high thereby confirming strength.
Second Breakout of Trend Channel in Process
Moreover, yesterdayβs advance ended clearly above the longer top rising channel line, triggering a second bullish breakout from the parallel trend channel. Will the second breakout lead to upside follow through? Certainly, it is starting to look that way. In addition to the trendlines noted above, the purple 20-Day MA is critical support if a retracement begins. It happens to match the price represented by the rising trendline today at 2,334.
Breakout Above 2,397 Triggers Bullish Continuation
A decisive rally above todayβs high of 2,397 provides a bullish signal. If this occurs the record high of 2,431 is the next target. Gold is likely to then continue to advance into new record high territory. The first new high target is around 2,461/2,462, marked by the confluence of two Fibonacci levels. It includes a 161.8% extension at of the retracement from the decline that began off the August 2011 trend high of 1,921. Therefore, it is potentially a significant price level as it covers a long period of time.
For a look at all of todayβs economic events, check out ourΒ economic calendar.
