Gold Price Forecast: Will A Double Bottom Pattern Spark Price Gains?

Gold suffered significant declines in late February and early March as US Treasury yields ground higher. Losses saw XAU/USD blow through various levels of technical support until the lower bound of the metal’s descending channel helped to arrest declines around the $1,675 mark. A picture-perfect bounce off the trendline and subsequent bounce off a nearby Fibonacci level has seen gold recover somewhat and recent price action has formed a double bottom technical pattern as a result.

GOLD (XAU/USD) PRICE CHART: DAILY TIME FRAME (NOVEMBER 2019 - APRIL 2021)

gold daily price chart

Generally viewed as a formation that precedes bullish price action, the recent double bottom pattern could hint gold may look to continue higher in the days ahead. Fundamental concerns remain to be sure, but a recent lack of progress in US Treasury yields and US Dollar weakness has opened the door for gold to recoup some losses. Still, despite the potentially bullish technical pattern, there is little to suggest the broader downtrend will be snapped.

Nevertheless, the pattern could allow for range trading opportunities. Initial resistance in the event of a continuation higher resides around the $1,765 mark which coincides with the metal’s November 2020 low. Should gold drive-through early resistance, $1,800 may materialize as a secondary barrier.

A move to $1,800 would see gold successfully retake the midpoint of the descending channel where it could then take aim at a series of moving averages overhead. Either way, conviction will be required to fulfill the double bottom pattern, so a sizable move through the $1,765 would be an encouraging sign at this stage.

GOLD (XAU/USD) PRICE CHART: 4 – HOUR TIME FRAME (AUGUST 2020 - MARCH 2021)

gold price chart

Although gold bulls may look to capitalize on the technical pattern and relatively accommodative fundamental backdrop, traders should continue to monitor the US 10-year Treasury yield. Rising yields have been a source of weakness for gold and if yields climb further, gold might enter another stage of weakness and seek support – despite technical patterns that might hint otherwise.

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