Bullish above 2,335
A decisive breakout above 2,335 would be the next sign of strength that may give gold a chance to continue its upward climb. Last week’s high of 2,388 is also important, as a move above this would trigger a weekly breakout and a rally above the most recent interim daily swing high. Gold began attempting a breakout from the ascending parallel trend channel in early April, but ultimately failed, dropping below the line on June 7. It has since traded below the line and is at risk of a deeper retracement than is currently being seen. A second upward breakout of the channel could continue if it can maintain the momentum once triggered.
Bearish below 2,296
A bearish pennant would be triggered by a drop below the lower line, but the recent minor low of 2,296 could be used as a clearer signal, while a drop below the three-week low of 2,287 would confirm a breakdown.
Possibility of double inside week
Unless gold rises above last week’s high of 2,342 by the end of the week, it is likely to finish this week as an inside week. As it stands, gold has had an inside week this week and last week. This indicates a contraction in price, which is usually followed by a spike in volatility. The direction this will take will be indicated by the breakout of the pennant pattern. A pennant indicates a breakdown is likely, but that could change if support holds and a bullish breakout follows instead.
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