Gold bulls achieved another milestone last week, successfully retracing half of the March-September downtrend to stretch to a new five-month high of 1,879 on Monday.
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Some caution could develop at this phase as the price is currently trading around a key constraining zone, which rejected the rally in 2011 and capped bullish actions several times over the past two years. Yet there are a couple of encouraging signals that could still secure buying positions and send the precious metal higher. Firstly, the bullish crosses between the simple moving averages (SMAs) are endorsing the clear positive trend in the short-term picture. Although close to overbought levels, the RSI and the stochastics have yet to show any convincing signs of weakness, while the MACD has resumed its positive momentum above its red signal line.
If the bulls claim the 1,878 bar and close above 1,900, the door will open for the 61.8% Fibonacci retracement of the 2,070–1,614 downtrend at 1,925. Running higher, the focus will immediately shift to the 1,980–2000 region, where upside pressures faded in April. Another victory here could easily prompt a rally towards the 2,070 record high.
Alternatively, a flip backwards could stall somewhere between the 50% Fibonacci level of 1,842 and the 20-day SMA at 1,816. If downside pressures dominate, the decline could next pause near the 200- and 50-day SMAs, which are currently converging around 1,775. A step lower is expected to press the price aggressively to the 23.6% Fibonacci zone of 1,722 and then to the 1,700 psychological mark.
All in all, gold has the foundation to boost its uptrend in the coming sessions, though some consolidation around the important resistance of 1,878 cannot be ruled out.