Today’s low of 2,659 is the main short-term support
A decline below today's low of 2,659 could lead to a test of support near the top flag trend line or the 20-day moving average near 2,645. However, if the 20-day line fails to hold as support, a deeper retracement may occur and the bull flag breakout may fail.
Price trends near the 20-day line should provide clues and attract attention as a potential support area. Note that during the pullback that formed the flag, the 20-day line was breached for several days, but recovered relatively quickly.
Weekly Breakout Support Rally
Also note that last week's low was 2,638. It is also an important price level, as anything below it would trigger a weekly bearish reversal. Even though there is a chance for gold to reach new highs after the bull flag is activated, this is not expected. The weekly chart (not shown) confirms this week's bullish scenario, with the move above last week's high of 2,661 triggering a weekly bullish reversal. Last week's pattern happened to be a bullish hammer candlestick.
A rise above today's high will trigger a continued rise.
A decisive rally above today's highs should lead to new highs for gold and signal a continuation of the bullish trend. We are then heading towards the Fibonacci confluence zone where we may see some resistance. The confluence zone is from 2,724 to 2,754. However, calculating the potential target from the bull flag formation shows a price of 2,815. This does not mean it will be achieved immediately, but it may be achieved eventually. Targets are one of the least reliable components of technical analysis. Nevertheless, if this trend causes a bullish continuation, it indicates that gold prices could rise.
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