Gold price exploded after break of $5000 barrier and eye $6000, but bulls may take a breather meantime

When gold broke through magic $5000 barrier on Monday, I was asked whether the metal can reach $5500 in coming months? My answer was that $6000 per ounce is very likely and in a matter of weeks, not by the end of the year, as some analysts predicted.

Four days later, gold touched the high at almost $5600, so if we follow that logic, reaching $6000 may take just few days.

In the current situation when demand grows exponentially, this may look like very likely scenario, but we must know that gold moved in nine-day uninterrupted rally, in which the metal price rose by $980 (around 21%) and the fact that each action produces reaction.

I believe that bulls may take a breather, as investors look to cash in on their huge profits, or at least a part.

The price may dip further in such scenario, as we have already witnessed pullback from new record high to the level below $5500, however, deeper drop is still needed to generate an initial signal of potential formation of Gravestone Doji pattern.

In this case, daily close below $5500 will be the minimum requirement to keep in play hopes of deeper pullback, with extension below $5400 breakpoint zone (near today’s low / Wednesday’s high / psychological) to boost negative signals.

Such scenario is supported by overstretched daily indicators from the technical point of view and slightly eased threats of US attack on Iran (as currently dominant driver of the price), following signals that US army is still in sit and wait mode.

On the other hand, bulls may regain traction like in past two days, when the price was initially in defensive and moved again higher during late US session, with other key factors standing behind the recent strong acceleration higher, being mainly intact and expected to further fuel bulls.

Res: 5600; 5700; 5726; 5807
Sup: 5500; 5470; 5400; 5350