On its daily time frame, Elliott Wave analysis of gold price movements shows that a triangle pattern has formed. In fact, gold is testing the triangle resistance at the $1300 major psychological area.
A selloff from this current level could push gold prices down to the bottom of the triangle pattern near the $1250 level. On the other hand, a strong upside break could mean that the consolidation is over and that further rallies are in the cards.
Gold Price Forecast
Risk appetite has been picking up in the financial markets lately while lower-yielding assets like the U.S. dollar have been selling off. Take note that gold is usually treated as a hedge to U.S. inflation, which suggests that the precious metal’s price might keep climbing if inflationary pressures are sustained.
The FOMC statement indicated that the Fed has no immediate plans of changing monetary policy or hiking interest rates just yet. Fed Chairperson Yellen did not give any time line on when they could possibly tighten policy, suggesting that the low interest rate period is likely to carry on and keep supporting the U.S. economy. This led to a strong stock price rally, pushing many indices to record highs.
As for gold, the price of the precious metal could keep trailing equities as risk sentiment continues to improve. With that, an upside break of the triangle resistance could be possible sooner or later. Take note that the triangle spans $1475 to $1175, which hints that gold could gain by as much as $300 if it is able to break past the triangle resistance.
Of course a downside break is also possible, although less likely to happen. In this case, gold prices could drop by as much as $300 as well.
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