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Gold forms a bullish pattern

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By Naeem Aslam    

Gold prices are higher on the first trading of the year as investors continue to remain optimistic on the back of the potential Fed’s monetary policy moves.

Gold staged decent gains in 2023 as the price surged a whopping 13% and investors and traders believe that the price can easily continue to surge this year.

The yellow metal started to rise mainly due to the optimism that the Federal Reserve will adopt a more dovish tone and monetary policy in 2024.

It is widely anticipated that the Fed will lower the interest rates by at least 100 basis points this year. The base rate in the US is 5.5%, while it was 4.5% same time last year this time.

In the aftermath of covid which flared up inflation in the US, the Fed increased the interest rates 11 times, but it didn’t move a muscle in the recent meetings.

According to the most recent FOMC Minutes, it was clear to a large extent that the Fed is done with its interest rate hikes and in 2024 we will see the Fed lowering rates. This particular factor boosted the price of gold and many believe that the real rally is about to begin.

Price Action

The gold price chart below shows that the price is trading pretty much close to it’s all time high and the price has respected its uptrend line.

In addition, the price has also formed a complex reverse head and shoulder pattern (these are with two shoulders and the right shoulders are higher than each other, as well as above the left shoulders) as one can see on the chart.

If the price completes this patterns projection, gold could easily cross above its all-time high and we could see the shining metal trading well above the $2,200 mark.

Gold price chart by XTB

 

Naeem Aslam is Chief Investment Officer at Zaye Capital Markets.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Zaye Capital Markets.