Gold prices hit new highs : what’s coming next?

Gold’s spot price (XAU/USD) wrapped up another bullish week, adding $100, rising by +4.65% and reaching new all-time highs at $2,330 per ounce. This surge has been driven in part by anticipation of reduced interest rates within the year, ongoing geopolitical conflicts, and some speculative purchases.

The upward trajectory of gold is unmistakable, especially after it established a significant low near $1,614 towards the end of 2022. With a pronounced long-term uptrend evident in both weekly and daily analyses, and with no immediate barriers in sight, numerous traders and investors are eyeing opportunities to buy on dips. As for technical support, the weekly analysis highlights a potential support level at $2,147, though it would require a considerable pullback to hit this mark anytime soon. On the daily chart, the first layer of support stands at $2,280, beneath which, a dip to $2,223 could be expected should the support fail.

On a shorter time frame, the H1 chart points to $2,304 as an immediate support level that could offer a foundation for price stabilization in the event of a downturn this week, with the next level of daily support at $2,280 just below.

RSI Indicates XAU/USD Overextension; Will Fundamentals Drive On Through Regardless?

The Weekly chart’s Relative Strength Index (RSI) is at its highest since 2020, while the daily chart’s RSI hints at emerging negative divergence, nearing a resistance at 87.21—a threshold last challenged in August 2020.

Despite the RSI suggesting caution, the current momentum behind the upward trend of gold is formidable. It’s also worth noting that in strong market trends, the RSI can remain in the overbought zone for extended periods, often giving premature signs of a downturn. Therefore, the recent readings from the RSI may suggest not a trend reversal but rather a brief correction, likely driven by investors cashing in profits, without threatening the support at $2,280.

The fundamentals do always require some consideration, and taking technicals as pointers and levels to watch, in order to help navigate pricing in the wider context of market fundamentals would be a sensible strategy. Others may be watching the underlying asset pricing for indicators as to movement in ASX listed shares in the sector, that will take some of their lead from asset values.

Some of the players on the ASX in the gold market include Northern Star Resources (ASX: NST), Newmont Corporation (ASX: NEM), Evolution Mining (EVN), Perseus (PRU), Red 5 (RED), and Bellevue Gold (BGL). Other mining stocks will also feel some impact of asset values should sentiment either push on or pull back.

Given the scenario, any market correction this week will likely attract buyers looking to either augment their existing positions or capitalize on the uptrend. Initial support at $2,304 on the H1 chart will be crucial for those monitoring for early signs of a correction, followed by the established daily support at $2,280.