Gold Breaks Out of Triangle Pattern, Targets $1,850
Gold has been trading in a symmetrical triangle pattern since June, consolidating between lower highs and higher lows. The pattern suggests a period of indecision and uncertainty, but also implies a potential breakout in either direction.
On August 9, gold finally broke out of the triangle to the upside, closing above the upper trendline and the 50-day moving average. The breakout was confirmed by a surge in volume and a bullish crossover of the MACD indicator.
The triangle breakout signals a continuation of the previous uptrend that started in March, when gold bottomed at $1,677. The measured move of the triangle projects a target of $1,850, which is also near the 200-day moving average and the resistance level from May.
The breakout also coincides with a weaker US dollar, as the market anticipates a lower-than-expected CPI inflation report for July. A lower CPI would ease the pressure on the Fed to taper its stimulus, which would benefit gold as a hedge against currency devaluation.
Therefore, I expect gold to continue its rally towards $1,850 in the coming weeks, as long as it stays above the triangle support and the 50-day moving average. A break below these levels would invalidate the bullish scenario and suggest a false breakout.
On August 9, gold finally broke out of the triangle to the upside, closing above the upper trendline and the 50-day moving average. The breakout was confirmed by a surge in volume and a bullish crossover of the MACD indicator.
The triangle breakout signals a continuation of the previous uptrend that started in March, when gold bottomed at $1,677. The measured move of the triangle projects a target of $1,850, which is also near the 200-day moving average and the resistance level from May.
The breakout also coincides with a weaker US dollar, as the market anticipates a lower-than-expected CPI inflation report for July. A lower CPI would ease the pressure on the Fed to taper its stimulus, which would benefit gold as a hedge against currency devaluation.
Therefore, I expect gold to continue its rally towards $1,850 in the coming weeks, as long as it stays above the triangle support and the 50-day moving average. A break below these levels would invalidate the bullish scenario and suggest a false breakout.
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