Gold prices have been on a rollercoaster ride in recent months, with the precious metal experiencing both sharp declines and impressive rallies. However, the latest development in the XAU/USD chart suggests that gold prices may be heading towards a significant upside.
The XAU/USD chart has broken out of a pennant formation, which is a technical pattern that indicates a continuation of the previous trend. In this case, the previous trend was an uptrend, which means that the breakout from the pennant formation is likely to result in further gains for gold prices.
The pennant formation is a pattern that occurs when there is a period of consolidation in a market after a strong move in one direction. The consolidation takes the form of a triangle, with the price action becoming increasingly narrow as it approaches the apex of the triangle. Eventually, the price breaks out of the triangle, either to the upside or the downside, indicating a continuation of the previous trend.
In the case of XAU/USD, the pennant formation began to form in early August, after gold prices had rallied sharply from their March lows. The consolidation period lasted for around six weeks, with the price action becoming increasingly narrow as it approached the apex of the triangle.
On August 27th, the price broke out of the pennant formation to the upside, indicating that gold prices were likely to continue their uptrend. Since then, gold prices have risen by around 2%, and many analysts are predicting that they could rise even further in the coming weeks.
One key factor that is likely to support gold prices in the near term is the ongoing uncertainty surrounding the global economy. With many countries still struggling to contain the COVID-19 pandemic and economic growth remaining sluggish, investors are likely to continue seeking safe-haven assets like gold.
Another factor that could support gold prices is the ongoing weakness in the US dollar. The dollar has been under pressure in recent months due to a combination of factors, including the Federal Reserve’s decision to keep interest rates near zero and the ongoing political uncertainty in the US.
Overall, the breakout from the pennant formation in XAU/USD is a bullish signal for gold prices, indicating that they could rise towards $2,043 in the coming weeks. However, as with any investment, there are always risks involved, and investors should carefully consider their options before making any decisions.
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