Gold Price Forecast: Bullish Pennant Pattern Analysis

In a recent analysis of gold prices, it was noted that despite some recent weakness, gold remains within a bullish pennant pattern. This pattern suggests a potential breakout unless the support level at $3,243 is breached, which could lead to further downside.

Current Price Action

On the latest trading day, gold consolidated within a narrow range of $3,283 to $3,316. This marked the first session in six days where the full price range was below the 50-Day Moving Average (MA), currently at $3,321. A breakdown below this moving average occurred previously, confirming a bearish signal. However, the formation of a bull pennant consolidation pattern, established from last week’s higher swing low, appears to take precedence over the short-term bearish behavior.

Key Price Levels

Bullish Scenario

For a bullish outlook, gold needs to break above the resistance levels of $3,346 to $3,366. An attempt to test support around the lower boundary of the pennant was made, but the day’s low did not reach it. If the pennant boundaries hold, a rally from this lower area could lead to an upside breakout. A breakout above Tuesday’s high of $3,346 would also push gold above both the 20-Day and 50-Day MAs, indicating a stronger bullish reversal if it surpasses the recent swing high of $3,366.

Bearish Scenario

Conversely, if gold drops below the swing low of $3,243, it would indicate weakening momentum and a potential breakdown of the pennant pattern. This could lead to a retest of support around the 38.2% Fibonacci retracement level, with further declines possibly reaching the 50% retracement level at $3,041.

Conclusion

Overall, while the bullish pennant pattern suggests a potential for upward movement in gold prices, the critical support level at $3,243 must hold to maintain this outlook. Traders should closely monitor these key levels for indications of future price action.