Late in NY, Gold prices rallied $22.30 to $1,187.70, taking price to a three-month high. The rally was triggered after tame inflation in the U.S. supported the growing belief that the Federal Reserve is going to have a hard time agreeing to raise rates this year.
Price action on the Gold daily chart shows that since forming a bullish butterfly on July 20th with the $1,072.30 low, bullish momentum has accelerated once price broke above the 100-day SMA. Now riding a fourth consecutive daily rally, price is tentatively finding resistance from a bearish ABCD pattern.
Point D of the reversal pattern is targeted with the 161.8% Fibonacci expansion level of the B to C move. If valid, we could see price have a pullback towards the $1,175 area. A deeper correction could find support from the $1,145 zone.
If bullishness continues and the reversal pattern is invalidated, we could see price target the psychological $1,200 level. Further upside may come from the $1,220 level.
Downward momentum may eventually return, but for now, the precious metal may trade range bound between $1,150 and $1,250.
The trade: Sell Gold at $1,195 with a stop loss at $1,205 and a take profit at $1,175. The Risk/Reward Ratio is 1: 2