- Gold consolidates Thursday’s massive rally to two-months highs.
- A potential bull flag formation spotted on the hourly chart.
- A test of $1970 is on the cards, with eyes on NFP, US election results.
Gold finally broke its month-long consolidation to the upside and clinched two-month highs at $1952.54 on Thursday, showcasing a stellar performance.
The 1.5% rally came on the back of a sharp sell-off in the US dollar across the board, as the risk-on flows jumped on increased prospects of a Biden presidency in the nail-biting election race.
Further, the Fed’s willingness to boost bond-buying while pushing for a fiscal stimulus fuelled further gains in the inflation-hedge, gold.
At the time of writing, XAU/USD drops 0.50% to $1940, correcting a part of the previous day’s surge.
Despite the retreat, gold’s bullish momentum remains intact, as observed in the hourly chart.
Thursday’s advance and the resultant consolidation has carved out a likely bull flag formation on the said timeframe, with an hourly closing above the falling trendline resistance at $1946 needed to validate the pattern.
A bullish breakout will open doors towards the September month high of $1992. Ahead of that target, the bulls are likely to face a stiff hurdle at $1973, September 16 high.
The hourly Relative Strength Index (RSI) points higher while above the midline, currently standing at 60.41. This suggests that there is more scope for an additional upside.
Alternatively, should the price close below the falling trendline support at $1934 on an hourly basis, the pattern will get invalidated.
The correction is likely to gain traction below the latter, opening floors for a test of the upward-sloping 50-hourly moving average at $1920. Further south, the bullish 100-HMA support at $1908 could come into play.
All in all, the path of least resistance appears to the upside, as traders await the US election outcome and NFP data.
Gold: Hourly chart
Gold: Additional levels
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