Lats week, Gold (XAU/USD) made a technical correction after reaching a high of 1,949.72 and closed on Friday at 1,920.
On the 4-hour chart, we can see the formation of a bullish pennant technical pattern.
This pattern has a bullish target. The break above 1,930 and above the 21 SMA located at 1,929 could confirm a strong bullish momentum so that the price could reach the psychological level of 2,000.
The Fed announced on Wednesday the start of the tightening cycle of its monetary policy that could include six rate hikes in the remaining six meetings of 2022.
Gold has been benefiting as a safe-haven asset. If the tensions between Russia and Ukraine continue, gold is expected to return to levels of 2,070. However, if this changes, and adding the weight of the Fed, gold could fall in the coming months to the level of 1,700.
On the other hand, if the decline in Treasury yields continues, this could benefit gold and it could rise above 1,930. Apart from this, the rally lacks any fundamental data and any momentum eventually will end up with a correction.
Bulls may refrain from opening aggressive positions amid signs of progress in ceasefire talks between Russia and Ukraine.
Optimism about a diplomatic solution to end the war in Ukraine continued to support positive sentiment, which could further contribute to limiting gains for safe-haven gold in the coming days.
The eagle indicator has dropped to the 5-point zone which represents an imminent rebound. It is likely that in the next few hours or days gold could break out of this oversold zone and could find a recovery only if it trades above 1,930.
On the contrary, the key support is located at 1,913 that matches EMA 200. A daily close below 1,912 could accelerate the bearish move. The price could fall to cover the GAP left on February 24 and reach the support of 6/8 Murray at 1,875.
Our trading plan for the next few hours is to wait for a breakout of the bullish pennant pattern and buy above 1,930 with targets at 1,979 and 2,000.