Gold poised for potential upside breakout

Gold (daily chart) has been consolidating its recent gains in a tight trading range around the 1325 support/resistance level for the past three weeks. This consolidation range has formed an extended flag-like chart pattern that appears poised for a potential upside breakout.

The recent rise in the precious metal brought the price up from a low of 1240 in early June to a three-month high of 1333 in the beginning of July. This rise represents a partial recovery of the recent decline from the 2014 high of 1392 in mid-March down to the noted June 1240 low. The partial recovery has thus far reached up to the 61.8% Fibonacci retracement of that decline.

The recent run-up in gold has prompted its 50-day moving average to bounce up off its 200-day moving average, a technically bullish indication. Currently fluctuating within the noted trading range, any strong breakout above the 1333 high and the 61.8% Fibonacci level could prompt the precious metal to advance higher, targeting a re-test of the 2014 high around 1392. Further to the upside is the major 1425 resistance objective. To the downside, key short-term support within the current consolidation resides around the 1305 level.

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