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Fed Minutes Released, Continuing an Ascending Triangle Pattern in Gold

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This morning’s release of the minutes from last month’s FOMC meeting provided some upside momentum to move gold off this morning’s lows. After trading to a high of $1,298 in overseas trading last night, traders bid prices lower in morning trading taking gold to $1,287 per ounce.

This low remained up until the release of the minutes which indicated a less aggressive Fed then had been factored into market sentiment. The minutes suggested that a June rate hike was highly probable. They also used verbiage (symmetric 2%) which indicated a higher degree of latitude in regard to their inflation target of 2%.

The minutes indicated that the Fed would stay the course in terms of rate hikes this year, as well as in 2019. The minutes also reported that the criteria for determining rate hikes remain unchanged.

“Members agreed that the timing and size of future adjustments to the target range for the federal funds rate would depend on their assessments of realized and expected economic conditions relative to the Committee's objectives of maximum employment and 2 percent inflation. They reiterated that this assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

Gold’s Ascending Triangle Pattern

This most recent bounce off the lows seen this week at 1,281 indicates that the most prevalent pattern in gold is still an ascending bottom and flat top, commonly called an ascending triangle. This pattern is a bullish continuation pattern identified in markets that are in an uptrend. It is created from a series of equal highs revealing strong resistance, in which corrections following each test of resistance are characterized by a higher low than the previous low.

On each higher low and retest of resistance, the market moves closer to the apex of the triangle. When the pattern completes, the price will break out above wedge by moving through resistance and trading to a new high. Following the break above resistance, that price point becomes a support level.

According to stock charts, a necessary component of this pattern is that a bullish trend has already developed. Because it is a bullish pattern, the length and duration of the trend are not as crucial as the robustness of the formation, which is paramount.

The rally began at the end of 2015 and took gold prices from $1,040 to $1,370 confirming the conclusion of a multiyear correction. This meets the criteria of an established trend.

If in the lows achieved this week hold, and prices move higher creating a higher low, the pattern would be in the final stages of completion, which would indicate an inevitable break above the major resistance in gold at $1,375 per ounce.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer