Gold Price Forecast: Tight Range Hints at Upcoming Volatility Surge

Tightening Range Designs Symmetrical Triangle

In addition, a symmetrical triangle pattern has been added to the chart (dark blue). It is also a good representation of contracting volatility. If gold stays within the boundaries of the triangle, consolidation will continue. But once a breakout either up or town triggers, volatility should expand. What follows a period of contracting volatility is typically a clear pickup in momentum.

Multiple Tests of Resistance

For each of the past few days, resistance was retested around the 50-Day line and price was rejected to the downside each time. In addition, a top rising trend channel line was also successfully tested as resistance as it has converged with the 50-Day line. Further, recent price action has also recognized resistance around the downtrend line. In summary, there are two trendlines and two moving averages that identify resistance near the highs of the past seven trading days.

Since gold is in a downtrend price structure, seeing resistance at lines that used to represent support is bearish and supportive of an eventual continuation lower for gold. However, a signal is needed as a bullish reversal remains a possibility as well. Sometimes, when a chart pattern seems clear, but momentum and volatility have contracted, a swing in the alternate direction occurs. Nevertheless, it is best to be prepared for either a continuation lower or a bullish reversal and higher prices.

Breakout – Up or Down?

A breakdown is indicated on a drop below the lower triangle line and then more clearly on a drop below the recent swing low at 2,294. There are then a couple interim price targets, but the primary downside target is 2,211 to 2,195. Meanwhile, bullish momentum should accelerate following a rise above 2,340 and more so on a move above last week’s high of 2,369.

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