British Pound to Hit Parity with US Dollar… Watch Gold Price

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What becomes apparent is that the reason the UK pound flash crash occurred last week is because it represents the completion of a massive 24-year Head & Shoulders topping pattern. Dating back from the low of 1.40 from 1993, each segment of the pattern has taken roughly 8 years to complete. Each subsequent 8-year low has seen a declining neckline (shown in black above) tested, up through the latest low post-Brexit at 1.32.

The 1.28 – 1.35 range for the pound shown on the first chart from June through October represented the last consolidation for the pound before the plunge through the neckline confirmed this pattern.

As the amplitude of the head measured 0.76, the ultimate target for this pattern is an equal distance below the neckline, which gives us reason to believe the pound will be breaking below parity with the US dollar over the next eight years and could reach a final target of 0.59. In other words, it may ultimately take only $0.59 US cents to buy one British pound.

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The ramifications for gold are significant.

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