The XAU/USD currency pair, which represents the price of gold in US dollars, has broken out of a pennant pattern, indicating potential upside towards $2,043 in gold price forecast. This breakout is significant for traders and investors who follow the precious metal market, as it suggests that gold prices may continue to rise in the near future.
A pennant pattern is a technical analysis chart pattern that occurs when there is a period of consolidation in a security’s price after a sharp move upwards or downwards. The pattern is formed by two converging trend lines that resemble a triangle. When the price breaks out of the pattern, it usually signals a continuation of the previous trend.
In the case of XAU/USD, the pennant pattern formed after a sharp rise in gold prices earlier this year. The price of gold reached an all-time high of $2,075 per ounce in August 2020, as investors sought safe-haven assets amid the COVID-19 pandemic and geopolitical tensions. However, the price then consolidated in a narrow range between $1,850 and $1,950 per ounce for several months, forming the pennant pattern.
On January 4, 2021, the price of gold broke out of the pennant pattern, rising above the upper trend line and reaching a high of $1,949 per ounce. This breakout suggests that gold prices may continue to rise towards the next resistance level at $2,043 per ounce.
Several factors are driving the bullish sentiment in the gold market. Firstly, the ongoing COVID-19 pandemic continues to weigh on global economic growth and increase uncertainty, which tends to boost demand for safe-haven assets like gold. Secondly, central banks around the world have implemented unprecedented monetary stimulus measures to support their economies, which could lead to inflation and further support gold prices. Finally, geopolitical tensions and trade disputes between major economies like the US and China could also increase demand for gold as a hedge against risk.
However, there are also risks to the gold price forecast. If the global economy recovers faster than expected from the pandemic, or if central banks begin to withdraw their stimulus measures, it could reduce demand for gold and lead to lower prices. Additionally, a stronger US dollar could also weigh on gold prices, as the two assets are often inversely correlated.
In conclusion, the breakout of the XAU/USD currency pair from a pennant pattern suggests that gold prices may continue to rise towards $2,043 per ounce in the near future. However, traders and investors should be aware of the risks to the gold price forecast, including a faster-than-expected economic recovery, central bank policy changes, and a stronger US dollar.
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