As with the other commodities and precious metals, the price of gold is inversely correlated to the price of the dollar. The strengthening of the US currency causes the prices of metals to weaken and USD depreciation – to their increase. According to the Bureau of Labor Statistics, headline annual inflation rose from 3% in June to 3.2% in July. This may put pressure on the Fed. As a result, keep interest rates “higher for longer.” Nevertheless, the rise was partly caused by changing year-over-year comparisons. Monthly data showed inflationary pressures are stabilizing. This would mean imminent interest rate cuts, which should be bullish for precious metals.
XAUUSD 1W Chart Analysis, September 1, 2023
XAUUSD – Will the bullish flag pattern repeat?
Between November 2022 and March 2023, a bullish flag formation (marked with red support and a red descending channel) is clearly visible. The flag was relatively short compared to the current one because it lasted 2 times shorter (2 months instead of 4). It is worth noting that its breakout resulted in over 11% movement within a month of its breakout. If the scenario were to repeat itself, the price might be eyeing the 2160 level.
The bullish flag pattern is supported by the RSI above 50 and the EMA9 still moving above the EMA50. Confirmation of the breakout should be sought in the closing of the weekly candle above the limit of the downward channel and the EMA9. The warning signal is the lack of a crossover on the MACD. The golden cross on this indicator should occur along with the continuation of the upward trend.
XAUUSD, Previous Fib Extension, September 1, 2023
Fib extension proves to be correct.
The Fibo extension tool proves to be very useful when projecting take-profit levels. In the case of the past bullish flag, the price came with a wick of candle to the Fibo retracement of 0.786 (2082) and then stopped at the retracement of 0.236 (1891) on the downside.
XAUUSD, Current Fib Extension, September 1, 2023
Current Fib extension.
Using the Fib extension tool again, note that the 0.786 retracement is at 2256, and the 0.236 is at 1997. For the continuation of the bullish flag pattern, the Fibo retracements marked on the chart can prove to be very important price action targets.
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