Gold prices broke upwards yesterday as we expected. Our preferred wave scenario was that the final fifth wave down was a failure and an upward bounce was expected. Prices have broken above the short-term resistance trend line as shown in the chart below. Prices are in an upward correction phase of the 1,360-1,210 decline.
Prices are expected to move towards the colored circle, where the downward sloping red trend line connects 1,433-1,360. This is important resistance level. The current upward bounce has the potential to move towards that level, but it will need a lot of power to break such important resistance.
The daily chart shows how prices reacted when they reached the longer-term support level, where the previous lows had been made. An upward bounce was expected and we should now expect the downward trend to be challenged. The Head-and-shoulders pattern continues to be valid. Prices are now testing the neckline that was once broken. Failure to break above the neckline will mean it is very possible to see another re-test of the lows. We are bullish in the short term with 1,290-1,300 target.
