The XAU/USD, which is the symbol for the price of gold in US dollars, has recently validated a pennant breakout. This indicates potential upside towards $2,043 in the gold price forecast.
First, let’s define what a pennant breakout is. A pennant is a technical chart pattern that forms when there is a period of consolidation after a sharp price movement. The pattern looks like a triangle with converging trend lines. When the price breaks out of the pattern, it usually indicates a continuation of the previous trend.
In the case of XAU/USD, the pennant formed after a sharp price increase in July 2020. The price then consolidated between August and September, forming the pennant pattern. On September 16, the price broke out of the pattern, indicating a continuation of the uptrend.
This breakout was validated by a strong bullish candlestick on September 17. The price has since continued to rise, reaching a high of $1,974 on September 22.
So, what does this mean for the gold price forecast? The breakout of the pennant pattern suggests that the price of gold will continue to rise towards $2,043. This is based on the height of the pennant pattern added to the breakout point.
However, it’s important to note that technical analysis is not always accurate and should be used in conjunction with other forms of analysis. There are also external factors that can affect the price of gold, such as economic data, geopolitical events, and changes in monetary policy.
One factor that is currently affecting the gold price is the uncertainty surrounding the US presidential election. Investors are turning to gold as a safe haven asset in case there is a contested election or political turmoil.
Another factor is the ongoing COVID-19 pandemic and its impact on the global economy. Central banks around the world have implemented monetary stimulus measures to support their economies, which has led to a weakening of currencies and an increase in demand for gold.
In conclusion, the XAU/USD validating a pennant breakout is a bullish signal for the gold price forecast. However, it’s important to consider other factors that can affect the price of gold and use technical analysis in conjunction with other forms of analysis. Investors should also be aware of the risks involved in trading gold and have a solid risk management strategy in place.
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