Gold Price Forecast: 20-Day MA Support Faces Crucial Test

Gold dipped to a new pullback low of 2,725 on Tuesday as it continued to see weakness following a bearish one-day reversal last Thursday. Since then, momentum has died down as seen in the recent narrow range days. Gold looks to be on its way to test support around the 20-Day MA, now at 2,711.

The fact that it is doing so slowly may be an indication that underlying demand remains strong. If so, support at the 20-Day line might hold and lead to a bullish reversal. The potential significance of the 20-Day line is enhanced by the internal uptrend line that marks a similar price area.

Key Levels Seen at 20-Day MA

Since the 20-Day MA was reclaimed on August 8, it has done a good job of identifying trend support. There were a couple times since that gold fell below the line, but it didn’t last long. Therefore, support may be seen again around the 20-Day line. If it does not, and gold falls below the 20-Day line and stays there, it will highlight weakness and will improve the chance for a test of support around the 50-Day MA at 2,633.

However, potential support around the recent trend high and top of a bull flag pattern at 2,686, needs to also be considered. So, this means that if a decline below the 20-Day line occurs, watch the price action relative to the prior couple of times gold fell below the line since early-August, along with the 2,686-price zone.

Weekly Bearish Pattern a Concern

There is concern about a bearish pattern in the weekly chart for gold. Last week, a bearish doji shooting star pattern completed and the week closed below the previous record close of 2,747 from the week before. A bearish weekly breakdown triggers below last week’s low of 2,725. That would increase the chance of testing support around the 20-Day MA and the 2,686-prior high. However, if it is to trigger, it may not happen this week. It is too early to tell but there is a possibility that gold stays inside last week’s range until the close this week.

Finally, be aware that there have been two reversal days since a bull flag breakout triggered on October 15. There was an outside down day on October 23 and a sharp one-day bearish reversal to a three-day low on October 31.

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