FX.co ★ Gold developes new bullish pattern

Gold plunged today but it could still develop a new leg higher as long as it stays above 1,918 critical support. The price action developed a new down channel, a flag pattern that could represent a bullish formation. It's trading at 1,922 above 1,910 today's low.

XAU/USD slipped lower as the Federal Reserve is expected to increase its Federal Funds Rate six more times during the year. Also, a 0.50% hike is somehow expected in May. Still, Gold remains attractive for buyers during the current geopolitical tensions and because the inflationary pressure is high. Tomorrow, we may have some volatility around the UK inflation data and after the BOE GOV Bailey and Fed Chair Powell speeches.

XAU/USD Flag Formation!

As you can see on the h4 chart, gold found support on the channel's downside line. It has registered only a false breakdown below 1,918 static support, through the former low. Staying above this level and making an upside breakout above the channel's resistance could activate further growth.

A valid breakdown below 1,918 and a new lower low could open the door for a larger drop. This scenario invalidates a potential new leg higher.

XAU/USD Forecast!

A valid breakout above the downtrend line and through 1,941 former high could confirm further growth and could bring new long opportunities.