Gold Analysis: Symmetrical triangle bullish breakout likely on dovish Fed minutes

The XAU/USD pair (gold prices in terms of the US dollar) continued its winning streak and reached fresh two-week highs on Tuesday at 1151.42, although failed to surpass the falling trend line resistance of the potential symmetrical triangle pattern and retraced slightly to 1146.59 on close. However, the prices managed to hold above the 100-DMA located at 1143.87. The prices rallied to fresh peaks after the dismal US trade data further fuelled concerns over the US economic outlook, resulting in markets to believe that the 2015 Fed rate hike is out. Adding to this, the IMF slashed the global growth forecasts to 3.1% from 3.3% previous, the second downgrade for this year, amid China slowdown fears and falling commodity prices.

As for today’s trade so far, XAU/USD extends its upward march and remains heavily bid, scoring fresh 2-week highs 1153.07, with 1156.70 ( Sept 24 High) on sight. The yellow metal was caught by a renewed bid wave in the European morning and completely ignored the rising treasury yields along with the US dollar. The USD index jumps 0.18% to 95.69 levels. Further the latest weak German industrial figures added to the recent dismal macro news from the EU docket, which also dampens investors’ sentiment and lure them towards safe-havens such as gold. Later in the day, the pair may continue to remain underpinned by dropping Fed rate hike bets awaiting further direction from the FOMC minutes, which in all case is expected to reflect a dovish tilt.

Technicals – a triangle bullish break-out on closing basis could drive the pair toward 200-DMA

On daily charts, the prices remain well above the Fib 78.60% resistance (last week’s fall) located at 1145.54. Also, the pair breached the falling trend line resistance of the symmetrical triangle pattern. However, a daily closing above the same would confirm a bullish breakout and point to further upside in the short to medium term. The daily RSI around 60 has inched slightly lower, suggesting a minor correction could be expected before the broader uptrend resumes.

To the downside, the pair could test the above-mentioned Fib 78.60% support, below which the crucial 100-DMA support is place at 1143.27. To the upside, if the pair manages to surpass the daily highs at 1153.07, the next barrier could be faced at 1156.70 (previous highs). A break beyond the last, the prices could climb further towards the Aug 24 high at 1170 levels. This might hold true if the Fed minutes are read as more dovish than expectations.