Follow-through is a key indicator
Follow-through from here is the key. A move above today's high could lead to an upside move as it moves back above the trend line and back into gold, further confirming the failure of the bearish flag. The chart above the flag will display a purple parallel line at the top. A sustained rally above the trendline would indicate strength, but a rally above the recent swing high of 2,721 would be needed to trigger a bullish reversal from the recent bearish correction.
Bullish momentum begins
Today's bullish momentum follows a breakout of the intraweek pattern triggered by yesterday's move above 2,657. A bullish reversal on the weekly chart would support the potential for gold to continue rising in the short term. The 2721 swing high was a 5-week high. If the upward momentum above today's highs is maintained, it appears that gold has a chance to test and therefore potentially break above that high. It is worth noting that today's rise also exceeded the 2,686 swing high since September. This is another clue that buyers are starting to become more aggressive.
Pullback may find support at 50-day line
Nevertheless, further consolidation may occur leading to increased market uncertainty. As mentioned earlier, further signs of strength will be needed if gold is likely to reach recent highs. A pullback from today's highs could find support near the 50-day moving average. How gold moves around the 50-day line should provide clues as to its strength or weakness. This line can be noted along with the recent minor swing high of 2,666.
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