Gold Price Faces First Major Test Since August Breakout
The gold price has been experiencing a significant pullback to test prior resistance as support. This larger trend structure is a normal and potentially healthy process for the developing uptrend, provided support holds.
The August breakout was marked by a sharp bullish reversal signal above the 50-day moving average on August 5, followed by a 15% rally to a high of $4,697 in late-August. The current decline is the first test of the 50-day moving average as support since it was reclaimed in the August rally.
The converging signals could set up for the next move, with gold sitting in a narrowing range between support near the 50-day moving average and resistance at the 200-day moving average. The current decline is the first test of the 50-day moving average as support since it was reclaimed in the August rally.
The setup is particularly notable because the moving averages are converging along with a tight nine-day consolidation range at the intersection of two long-term trendlines, one rising and one falling, as well as the short-term uptrend line. A successful hold of support in this increasingly compressed structure would strengthen the case for the uptrend to resume.