Gold’s Trend Remains Strong, Yet Critical Resistance Defines the Next Move

What to Know

• Gold remains in a strong long-term uptrend above the 10- and 20-week averages.
• A weekly close above $4,245 is needed to confirm renewed bullish momentum.
• The 600% Fibonacci extension near the record high acts as a major barrier.
• Failure to break decisively higher increases the risk of a deeper correction.
• Trend structure still favors buyers unless gold falls below key weekly averages.

Gold Holds Support After Record High

Following its new record high of $4,382 in October, gold (XAU/USD) pulled back to test support near the 20-week moving average. This zone has now been confirmed as an area of dynamic support for five consecutive weeks, highlighted by a sequence of higher weekly lows. The pattern reinforces the strength of the long-term bullish trend, giving gold room to continue higher as long as it holds above the 10-week moving average, currently rising at $4,084. Last week’s low at $4,040 is another important decision point, as it sits near the 10-week average and is part of the existing structure of higher weekly lows.

Long-Term Breakout Remains Dominant

Gold sustained a major long-term base breakout in early March with a fresh weekly closing high. Measured from the October 2023 low, the metal had advanced $2,571 (142%) at the recent high. Relative to the breakout trigger at $2,081, gold was up $2,300 (110.5%). The rising slope of successive uptrend lines reflects improving demand since the breakout, and both the intermediate trend (20-week) and short-term trend (10-week) remain aligned to the upside. A failure of the 10-week average would be the first meaningful technical warning, potentially opening the way for a test of the 20-week line, now at $3,788.

Key Levels for Confirming the Next Advance

To confirm the next bullish signal, gold needs a weekly close above the recent five-week high at $4,245. That would strengthen the probability of an eventual breakout to new record levels. Fibonacci extensions of the recent pullback produce potential targets at $4,516 (127.2%) and $4,688 (161.8%), levels that come into focus if buyers maintain control. 

Significance of the 600% Extension

Despite constructive trends and multiple bullish signals, gold still needs to demonstrate renewed demand and underlying control by buyers. One noteworthy element is that the recent record high developed near the completion of a 600% Fibonacci extension of the downswing that followed the 2020 high of $2,075. Price reacted to the $4,376 level as resistance was seen at $4,782, suggesting the market recognized the extension as a technical barrier. The fact that bullish momentum has been rising as seen in the increasing slope of the uptrend lines, also suggests caution until strength is proven. 

Risks of a Larger Correction

Because the recent high aligns with the largest prior bearish correction, there remains the possibility that this level becomes more significant resistance than currently reflected in price action. A 600% extension of a previous downswing can indicate an overextended market, raising the risk of a deeper or longer-lasting correction unless gold can decisively clear $4,382. Until that breakout occurs, traders should remain aware of the potential for consolidation or further retracement, even as the broader long-term trend continues to favor the bulls.

 

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