Gold price got rejected from the apex of a contracting triangle and now heads for the second one. Despite a stronger USD yesterday and a decline in the price of gold, the yellow metal will likely correlate with the stock prices and a possible risk-on move towards the end of the trading week.
In the meantime, the price of gold recovered the $1,900 level as the stock market indices trade higher in after-hours. Moving forward, the chances are that a stretch towards the $1,950 will be met with selling as the apex of the contracting triangle acts as strong horizontal resistance.
CPI Sparked a Higher USD Yesterday
After the Columbus Day holiday, the U.S. Consumer Price Index (CPI) sent the USD higher across the board. It also caused a drop in the gold price, albeit the market recovered later in the trading day.
While the monthly CPI came in at 0.2% on expectations of 0.4%, the year on year release remained close to the Fed’s target, showing 1.7% on the core data. That is what triggered the higher USD move, but also the move lower in stocks as the stock market remains sensitive to any news related to the possible second fiscal stimulus package.
Gold Price Aiming for the Apex of a Contracting Triangle
The technical picture on the price of gold shows two contracting triangles – one that acted as a continuation pattern and one that acted as a reversal. In both cases, the apex provides strong support and resistance. The price moved towards the apex of the first triangle and met support, and now it should find resistance on the apex of the second triangle.
Aggressive bulls may want to trade gold on the upside with $1,950 as a target. However, the invalidation level for the long trade does not warrant a positive risk-reward ratio. Therefore, a better way would be to wait for the price to reach the apex at $1,950 and go short with a stop at $2,000 and targeting the first triangle’s apex.
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Gold Price Forecast
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