XAUUSD: Gold Breakaway Gap Puts an End to the Consolidation

I’ve discussed the gold (XAUUSD) bullish scenario for months.

I first wrote about it on this blog on October 19th.

And since September, I’ve said that XAUUSD may need to revisit the $1,790 area before moving higher.

It’s a level that was critical for gold between 2011 and 2012.

If you saw my November 28th forex forecast, you know about the support area between $1,700 and $1,790.

Those were the locations of two descending channels we had on our radar.

XAUUSD caught a bid at the higher level and bounced from $1,760 on November 30th and never looked back.

As you can tell, today’s breakout above $1,900 has been in the works for a long time.

Now, you may be wondering about today’s gap up.

I often talk about the need for gaps to close before a market can move higher or lower.

However, no two gaps are the same.

In the case of XAUUSD, Monday’s gap is what’s called a breakaway gap.

It’s a gap that occurs as a market breaks free from a range or congestion area.

That certainly applies to gold, given that this gap up occurred following five months of consolidation.

The gap higher is also with the trend.

That’s a significant factor when trading any breakaway gap.

As for entries, the best ones were below $1,900.

We knew about the $1,760 support area, as well as $1,850, which flipped to support a few weeks ago.

That said, XAUUSD probably needs to clear the $1,930 area on a daily and weekly closing basis to re-expose $2,000.

Notice how $1,930 has been key since last August.

But everything below $2,075 is just the warm-up, in my opinion.

The real story here is how a close above $1,900 would confirm the bull flag pattern and open the door to the objective at $2,380.

I first mentioned that target on December 7th.