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Gold Price Outlook: Double Bottom May Bring a Short-Term Buying Opportunity

Gold prices
Gold prices

Rising bond yields presented an opportunity for a retracement pullback in the gold price this Friday. The US 10-year Treasury asset added more than 2% on the day in a rebound which followed a sandwich of progressive losses interspersed with minor gains.

The precious metal had pushed towards $1750 after dovish FOMC minutes on Wednesday. However, higher yields on bond yields this Friday meant that capital flows drifted away from the non-yielding metal.

A look at the daily price chart indicates that gold price could benefit from short-term additional gains on the back of the double bottom pattern. However, investors still believe that a faster-than-expected recovery of the US economy could spur the Fed into raising rates, well ahead of the proposed lift-off date. This could cap gold price in the long term. 

Technical levels to watch

 The pullback experienced today sends gold prices towards the 1741.01 support level. The intraday bounce on the candle keeps the XAU/USD pair above this support level, which also serves as the neckline of the double bottom pattern. This presents a potential buying opportunity to ride the price towards the 1789.49 resistance, which is the termination point of the measured move from the neckline. The actualization of this move depends on bulls taking out the 1763.30 resistance along the way.

However, if gold prices break below the 1741.01 support, the double bottom pattern is invalidated, opening the door towards the 1719.13 support (18 March and 5 April lows). A further decline brings 1699.43 into the picture, with 1680.59 serving as additional support.

Gold Price (XAU/USD) Daily Chart