Gold prices have crossed above $1600, triggering uptrend continuation. Quite remarkably, the XAU/USD pair has broken above a month old pennant pattern. Such a strong move can indeed be considered as a prelude for the upcoming bullish price actions.
The main driver behind the gold price rally remains the Chinese concerns developed out of Coronavirus outbreak.
Wall Street Panics over Apple’s Statements
Last day, Apple Inc. (NASDAQ: AAPL), the world’s first company to record market capitalization of $1 trillion, had issued a revenue warning. The company said that it might miss the revenue target as mentioned in its revenue guidance because of low Chinese demand that occurred out of coronavirus impact.
Along with AAPL, Europe’s biggest bank – HSBC Bank reported its earning far below the market estimations.
Both factors snowballed into a vicious circle and brought the overall global markets down. And, thereby lifting the gold prices above $1575 mark.
Anyhow, Coronavirus cases appear to have dropped slightly for a second straight day. But, at present, the World Health Organization finds it a bit difficult to conclude the slowdown of the epidemic unless strong evidence is available.
There was an evident indication of a pennant breakout near $1575 level. However, as the Parabolic SAR was lingering above the XAU/USD pair, things weren’t confirmed. Anyhow, the bull rally continues to stay intact, heading towards the next upper targets.
The momentum indicating technical indicator – Stochastic Oscillator revealed that the momentum has entered into the overbought territory. In this way, the gold markets continue to flourish near its seven-year highs with higher momentum under firepower.
Along with these factors, the SMA conflux that consists of 50-day, 100-day, and 200-day SMA remains instilled below the pair, cheering the bulls.
As I observe the 4H time frame of the yellow metal price chart, I see the momentum clinched near the overbought conditions since Feb. 13. And, on a closer look, I can hardly find any weakness or reversal candlesticks that might drain the accumulated gains in the near term.
Nevertheless, after taking a short halt near $1600 pivotal handle, the gold prices took a further jump of 10 pips, justifying the trend. The pair was trading along the upper boundary of the Bollinger Bands, keeping the uptrend intact.
Though positive expectations overlay the other sets of probabilities, I would consider the $1600 level (the previous resistance level that could turn into support level) as a potential downside barrier in case of any unexpected downfall.