Gold Price Forecast: Bullish continuation strengthens case for a test of 200-day EMA

Omkar Godbole FXStreet Contributor

Currently, gold is trading at $1,236 per Oz, having clocked a high of 3.5-month high of $1,240 earlier this week.

More importantly, the yellow metal closed at $1,235.29 yesterday, confirming an upside break of the bull flag - a bullish continuation pattern - which indicates a continuation of the rally from the Oct. 9 low of $1,183.

Daily chart

`Chart Source: Netdania`

The bull flag breakout has only bolstered the already bullish setup: The 5-day and 10-day exponential moving averages (EMAs) are trending north. The 50-day EMA is beginning to rise in favor of the bulls and the 100-day EMA hurdle has been scaled. Further, the 5-week and 10-week EMAs have generated a bull cross.

Read: Gold: Value of call options hit 4.5-month high

And last but not the least, the narrative on the risk aversion and its impact on the Fed's tightening plans are beginning to change in favor of gold - the dollar index (gold's biggest nemesis) fell to 96.25 in Asia, amid a sharp drop in Asian stocks, likely due to rising fears that a sustained risk aversion may force the Fed to soften its hawkish stance.

As a result, the yellow metal could soon test the 200-day exponential moving average (EMA) of $1,251.

Only an acceptance below the 10-week EMA (currently at $1,216) would invalidate the bullish setup.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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