Gold (XAU/USD) daily chart
Gold is showing signs of a flag pattern formation as it hovers near recent record highs this week. While there was a recent attempt to break through the key resistance level around $2,475-80, buyers paused their momentum. However, they are now regaining strength as the weekend approaches.
The Federal Reserve’s decision to cut rates, coupled with declining yields, presents a bullish case for gold. Despite this, the technical aspect paints a different picture. Since the sharp increase in March, there has been minimal retracement in gold’s price.
Although there was a period of consolidation from mid-April to end-June, it wasn’t a significant pullback. To provide context, gold saw a 13% increase in 2023 and has already surged by nearly 20% in 2024.
While there are arguments supporting a long-term bullish outlook for gold, there are also indications of a potential pullback from a technical standpoint.
The Case for Gold: Price Action and Patterns
Despite the various factors influencing gold’s performance, current price action and patterns present a compelling argument for the precious metal.
The simplest approach would be to observe the break of the flag pattern. A breakout above $2,475-80 could signal further upside momentum, while a decline below $2,400 might challenge the 100-day moving average around $2,362.
Additional insight: By closely monitoring the price action and key technical levels, traders and investors can make more informed decisions regarding their positions in gold. It is essential to consider both fundamental factors, such as Fed policies and yields, as well as technical indicators to gain a comprehensive understanding of the market dynamics. Additionally, keeping an eye on potential breakouts or reversals based on price patterns can help traders capitalize on opportunities in the gold market.
