Range limit until moving average is broken
In this week's price action, gold prices are contained between resistance near the 20-day moving average at 2,719 and support near the 50-day moving average at 2,643. This could lead to further consolidation between the two moving averages or a move through one of the price levels.
Notice that the upward angle of the 50-day line accelerates around early October. It started to rise away from the internal trend line, which is also a lower parallel channel line. This action is consistent with increasing demand and improving bullish momentum. Yesterday marked the first support test at the 50-day moving average after the bullish reversal from the August 5th line.
Monthly support 2,602
The swing low at 2,602 is also the bottom of the bull flag pattern and constitutes a higher swing low trend structure. Therefore, a decline below that indicates a change in the price structure and increases the likelihood of further declines. Importantly, the low of 2,602 was also October support.
Strong trend of monthly low price rise
Since February, gold has experienced a nine-month cycle of rising monthly lows and rising highs, with the exception of June, which was an inside month. There is a possibility of an intra-month pattern in November as well. Gold also looks very likely to end the month in a similar position. What this means is that a pattern of higher monthly lows defines the strength of the uptrend, while a drop below the monthly low is a clear change in the pattern. Once that happens, a deeper retracement becomes more likely.
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