Double bottom pattern sets gold for rebound up to $4,150

Gold prices began last week with a decline, but failed to consolidate below the $3,930 level, just as in late October. The precious metal then resumed its rally, forming a double bottom on the daily chart. The upward movement accelerated during today's early trading, as gold broke above the pattern’s neckline at $4,030. The short-term target for bulls could be $4,150, followed by profit-taking.

The Stochastic Oscillator lines have already crossed and shifted to growth, confirming the buy signal. Meanwhile, the RSI is only attempting to rebound from oversold territory, leaving plenty of room for gold to extend its gains. As long as the price remains above the $3,930 level and the 50-day moving average, this scenario will be the main one.

Financial market players are now actively discussing a potential end to the US government shutdown. Over the weekend, the Democratic and Republican parties reached an agreement on key budget issues, meaning American authorities may soon resume operation. Surprisingly, such news sparked a surge in demand for both stocks and gold. While fading shutdown risks should theoretically reduce the need for safe-haven assets, traders are clearly interpreting the situation differently.

Once US government agencies return to normal operations, they will begin publishing economic statistics accumulated over the past month and a half. According to analysts polled by Reuters, these reports will reflect a further deterioration in the American labor market, further exacerbated by the effects of the shutdown. The University of Michigan's survey results, released on Friday, showed the worst US consumer sentiment in three and a half years. Given these data, the growing interest in gold seems quite reasonable.

Consider the following trading strategy:

Buy gold above $4,030, with Take profit at $4,150 and Stop loss at $3,930.