The XAU/USD has recently broken out of a pennant pattern, indicating a potential increase in the price of gold towards $2,043. This is an important development for investors who are looking to invest in gold as a safe haven asset.
A pennant pattern is a technical analysis pattern that is formed when there is a period of consolidation after a strong price movement. The pattern is formed by drawing two trend lines that converge towards each other, forming a triangle shape. The pattern is considered to be a continuation pattern, which means that the price is likely to continue in the same direction as the previous trend.
In the case of the XAU/USD, the pennant pattern formed after a strong upward movement in the price of gold. The pattern was formed between July and August 2020, with the trend lines converging towards each other. On August 6, 2020, the price of gold broke out of the pattern, indicating that the price is likely to continue its upward movement.
There are several reasons why the price of gold is likely to increase in the coming months. Firstly, there is a lot of uncertainty in the global economy due to the COVID-19 pandemic. This has led to a flight to safe haven assets such as gold, which is seen as a store of value during times of economic uncertainty.
Secondly, central banks around the world have been implementing monetary policies that are designed to stimulate economic growth. This has led to an increase in the money supply, which can lead to inflation. Gold is often seen as a hedge against inflation, as its value tends to increase during periods of high inflation.
Finally, geopolitical tensions around the world have also contributed to an increase in demand for gold. There are ongoing tensions between the US and China, as well as between North Korea and South Korea. These tensions have led to an increase in demand for safe haven assets such as gold.
In conclusion, the XAU/USD has broken out of a pennant pattern, indicating a potential increase in the price of gold towards $2,043. There are several reasons why the price of gold is likely to increase in the coming months, including economic uncertainty, monetary policy, and geopolitical tensions. Investors who are looking to invest in gold as a safe haven asset should consider this development and take advantage of the potential increase in the price of gold.
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