Gold Price Forecast: Near-Term Bullish Outlook Hinges on Key Support Levels

Gold Price Forecast: Near-Term Bullish Outlook Hinges on Key Support Levels

Gold prices have shown strong bullish signs recently, but the precious metal's near-term outlook depends on holding key support levels and breaking resistance at $2,726. A successful breakout could set the stage for gold to challenge its recent record high.

Recent Price Action and Support Testing

On Thursday, gold prices rallied to reclaim the $2,721 level, briefly reaching a higher swing high of $2,726 before facing selling pressure that brought prices down to $2,675. This decline successfully tested support around the 50-Day Moving Average (MA) and a downtrend line, which provided a critical level of support.

As of now, gold is on track to close weak, trading in the lower half of the day’s range and below the lower line of a rising parallel channel. Despite this, gold’s earlier daily close above the parallel channel line marked a significant development, representing the first time since November that this support level was reclaimed.

Bullish Evidence Building

The price action from the recent higher swing low of $2,605 shows positive momentum. With a daily close above the lower rising channel line yesterday, gold is well-positioned to break out above the November swing high and potentially test the all-time high of $2,790.

Additionally, a weekly bullish signal was triggered this week, and it will confirm if gold closes above last week’s high of $2,657. Although today's advance has triggered a higher swing high, confirmation through a daily close above $2,726 is needed to confirm bullish continuation.

Key Support Levels to Watch

A critical near-term support level is the 50-Day Moving Average, currently serving as a key indicator. If gold continues to find support above or around this line, the bullish outlook remains intact. A breakout above $2,726 would further confirm the bullish trend. However, if gold drops below the 50-Day MA and remains there, the next potential support areas to watch are the intersection of rising and falling trendlines around $2,654, and the 20-Day MA near $2,649.

Rebound from a Healthy Correction

Gold recently experienced a 9.1% correction, falling from a high of $2,790 to a low of $2,537. This correction marked the largest decline since a 13% drop following the May 2023 peak. However, this pullback appears to be a healthy consolidation within a strengthening trend, and combined with recent bullish technical signals, it suggests that gold is likely to continue its upward trajectory.

Conclusion

Gold’s outlook remains bullish in the near term, provided it holds key support levels, particularly around the 50-Day MA, and breaks through resistance at $2,726. The price correction earlier this month is viewed as a healthy pullback, and the overall trend appears to be strengthening. Investors will need to watch for a decisive move above these levels to confirm further gains, with the potential for gold to challenge its all-time high in the near future.