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Double Bottom on XAUUSD: Gold Prices to Trade Higher?

Gold Prices
Gold Price

Risk aversion triggered a flight to safety in yesterday’s trading which benefitted gold. XAUUSD traded steadily higher from an intraday low of $1,459.53 to $1,481.60. Gold prices later on settled at $1,476.86, over 14 cents higher than where they opened for the day.

Risk Aversion Triggered by US President Donald Trump

US President Donald Trump’s speech at the White House yesterday triggered risk aversion. For one, he criticized the dollar’s strength. He also reiterated the need for the Fed to adopt negative rates. More importantly, he said that he is not in any hurry to strike a deal with China. He has been critical of negotiations and has been adamant in agreeing to China’s offers. People close to negotiations say that he is worried that the US may get the losing end of a deal.

Consequently, this sparked concerns that the US and China may not be able to pass a phase one deal by this year. This is bad news for market participants as the two countries are the largest economies in the world. If the trade war exacerbates, global economic growth could take a turn for the worse.

US Data Due Today

Later today, the ADP and ISM non-manufacturing PMI reports are scheduled for release. At 8:15 am GMT, the ADP report is expected to print at 137,000. On the other hand, the ISM non-manufacturing PMI is seen to come in at 54.5.

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Gold Price Outlook

XAUUSD looks like it has formed a double bottom chart pattern on the 4-hour chart. In forex trading, this is widely seen as a bullish indicator. However, any upside movement on gold prices could be limited by the falling trend line (from connecting the highs of September 4 and November 4) around $1,492.41. Watch out for a strong close above this level because the next resistance will be at $1,515.14. On the contrary, if resistance at the trend line holds, XAUUSD could drop to support around $1,452.70.

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