Gold Price Forecast: Momentum Needed for XAU to Challenge $3,500 High

Gold pulled back to a three-day low of $3,366 on Tuesday, before finding support. This established a minor retracement from the near-term trend high of $3,451, reached on Monday. Nonetheless, gold retained the pattern of higher swing lows and higher swing highs that has been witnessed since the May swing low at $3,121.

The 20-Day MA (purple), now at $3,343, recently converged with a short uptrend line, and they are identifying similar dynamic support levels for the near-term bull trend. The trend is well established and expected to move higher unless the 20-Day MA fails to hold as support. The trend on all timeframes remains bullish.

Steady Rise, Momentum Missing

A little below the 20-Day MA, is potential support of the 50-Day MA, now at $3,300. It identifies dynamic support for the bull trend that began near the beginning of this year. And therefore, it represents more significant support levels. Despite the bullish trend progression, the recognition of a bull breakout should be validated by a surge in momentum.

Since that was not seen during last week’s attempt to rise above the lower swing high from May at $3,439, it may be providing a warning. Gold is going to need strong bullish momentum to exceed the current record high at $3,500. That is what the trend pattern indicates is most likely. Regardless, change and unexpected behavior are two common market dynamics.

Bulls Watch for Break Above $3,451

The bull trend will show signs of continuation on a decisive rally above Monday’s high of $3,451. That would follow the highest weekly closing price for gold that was established last week, which is a bullish sign. In addition, a clearer break above the lower swing high at $3,439 would be indicated, providing a bullish reversal signal. That would confirm a reversal of the recent downtrend correction.

Although the swing high was exceeded briefly during Friday and Monday’s trading sessions, the breakout was never confirmed by a daily close above it. Once that occurs, the bull trend should accelerate its advance as demand improves with the market recognizing the bullish implications of the breakout.

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