Gold prices continue to climb in 2016 as expectations shift for the Fed to continue its tightening schedule appears to be shifting. Recent weaker economic data in the US and concerns in China have investors thinking the Fed may choose a slower rate hike pace. Gold has also remained strong this year on strong haven demand.
Price action on the gold daily chart shows that since forming a bullish butterfly pattern on July 24th with the $1,072.30 low, the bullish move remained firmly in place until price formed a bearish butterfly pattern on October 14th. We saw a deep correction with price finding major support at the $1,045.40 low.
The recent surge has gold hiting a 12-week high and it appears poised to test the 200-day SMA, which is around the $1,133.30 level. If the markets see a dovish Fed tomorrow, we could see gold rise to the $1,139.10 level. It is around that area that price could form a bearish Gartley pattern.
If this pattern is invalidated, further upside may come from the $1,180-1,200 zone.
The trade: Buy Gold at $1,115 with a stop loss at $1,105 and a take profit at $1,145. The Risk/Reward Ratio is 1:3