Key Takeaways
- Gold prices steadied in early trading on Thursday as investors refocused their attention on the possibility for aggressive interest rate cuts in the U.S. and escalating tensions in the Middle East.
- Investors should monitor for a breakout or breakdown from an ascending channel on the gold chart, which will likely provide clues about the precious metal’s next move.
- A breakdown from the pattern could see the gold price revisit support at $2,200 and $2,085, while a breakout could see price targets met at $2,675 and $2,770.
Gold (GOLD) prices, which typically outperform during times of economic uncertainty and geopolitical instability, steadied in early trading on Thursday as investors refocused their attention on on the possibility for aggressive interest rate cuts by the Federal Reserve amid economic weakness and escalating tensions in the Middle East.
The commodity’s uptick comes after a slump over the past week, with the yellow metal possibly pressured by market participants selling to compensate for steep losses in other asset classes. Earlier this week a rebound in the U.S. dollar also weighed on sentiment, making Greenback-priced bullion more expensive for buyers using foreign currencies.
Below, we point out import levels in the price of gold to watch out for amid a breakout or breakdown from a well-respected chart pattern.
Price Trades Within Ascending Channel
Following a strongly trending move in the gold price between February and April, the commodity has traded within a textbook ascending channel, a chart pattern which contains price action between two upward sloping parallel trendlines.
Looking ahead, investors should monitor for a breakout or breakdown from the channel for clues about gold’s next move.
Breakdown Price Levels to Monitor
Upon a breakdown, there are two key price levels where the precious metal could attract buying interest.
The first sits around $2,200, an area on the chart that finds a confluence of support from the rising 200-day moving average and a period of consolidation throughout most of March.
A failure to hold this level could trigger a fall to lower support at $2,085, where bullion bulls may seek buying opportunities near two prior swing highs that formed in December 2023 and January this year.
Breakout Price Targets to Watch
If a breakout from the ascending channel takes place, we can predict potential price targets using the measuring principle and a bars pattern.
To forecast a price target using the measuring principle, we take the distance between the channel’s two trendlines in points and apply that amount to its upper trendline. In this case we add $170 to $2,505, which currently projects a price target of $2,675.
Using a bars pattern, we generate an upside target by extracting gold’s upward trending move from February to April and reposition it from the June swing low, which predicts a price target of around $2,770.
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As of the date this article was written, the author does not own any of the above securities.