- Gold is seeking higher support, preferably at $1,720 ahead of the upswing toward $1,800.
- A technical breakout from the falling wedge flipped the trend bullish.
- XAU/USD will fail to reach the potential target if support at $1,720 and the 100 SMA is broken.
Gold is setting up for a colossal move to highs around $1,800. The world’s most precious metal appears to have flipped from an extended bearish trend to a bullish impulse. XAU/USD recently embraced support at $1,680, paving the way to the ongoing uptrend.
The multi-month downtrend printed a falling wedge pattern amid the calls for recovery. This a bullish chart pattern that usually occurs in a down-trending market. Two trendlines form this wedge, with one connecting a series of descending peaks and then the other connecting a series of descending troughs.
A breakout is expected to occur before the trendlines meet. The 4-hour chart shows gold already having broken out of the wedge and started the upswing toward $1,800. Resistance at $1,740, as highlighted by the 50 Simple Moving Average (SMA), cut short the upswing.
However, XAU/USD embraced higher support at $1,740. For now, the least resistance path is upwards, especially with the bulls slicing through the 100 SMA hurdle.
The Moving Average Convergence Divergence (MACD) reinforces the uptrend as it settles above the midline. An incoming MACD cross would a huge bullish signal. On the upside, overhead pressure at the 50 SMA and the 200 SMA is expected to delay the anticipated breakout.
XAU/USD 4-hour chart
On the flip side, gold must hold above the immediate support at $1,720 and, by extension, the 100 SMA to sustain the uptrend. Action under these two key zone would put pressure on lower anchors at $1,700 and $1,680, thus opening the door to massive declines.