Gold Prices Surge, But Breakout Confirmation Needed
The recent rally in gold prices has raised hopes for a breakout, but analysts at FOREX.com caution that confirmation is needed. The precious metal surged after reversing losses from the previous day, mirroring the market's tendency to reverse FOMC-related moves within 24 hours.
Despite the hawkish Federal Reserve statement on Wednesday, markets showed resilience, with US indices and gold prices returning to pre-FOMC levels. However, the technical analysis of gold suggests a breakout from a falling wedge pattern, which looks similar to price action preceding the breakout in early August.
The bigger risk is that this bullish-looking price action turns out to be another false signal, leading to a more significant correction. To confirm the breakout, analysts are looking for gold to break above $4,400 on a closing basis, with further resistance seen around $4,500 and $4,565.