XAU/USD Current price: $2,117.90
- Spot Gold continues its upward momentum, reaching $2,117.90 with Wall Street’s opening.
- The soft tone of government bond yields is supporting XAU/USD on its upward trajectory.
- Despite being overbought in the near term, XAU/USD could still rally towards $2,135.
Spot Gold surpassed the $2,100 mark on Monday, extending its gains from Friday. The recent rally saw XAU/USD experiencing its largest intraday gain since December, adding approximately $55.00 in the last trading day of the previous week.
The increase in the price of gold began following the release of US inflation figures that were in line with expectations. The slower rise in inflation brought relief to markets after fears of higher price pressures due to previous data. Additionally, concerns about a slowing economy were revived with the release of lower-than-expected PMI figures on Friday.
Treasury yields also dropped on Friday, adding further pressure on the US Dollar and supporting gold prices. Although yields have started to rise slightly, they are not yet at a level to change the direction of XAU/USD.
XAU/USD short-term technical outlook
On the daily chart, XAU/USD is approaching intraday highs near $2,118, close to the record high in December. Technical indicators show a strong upward trend, with the pair in overbought territory but without signals of a reversal. Support levels are seen around $2,120.50, $2,134.60, and $2,150.00, while resistance levels are at $2,107.40, $2,096.90, and $2,084.50.
In the near term, despite being in extreme conditions, XAU/USD continues to show upward potential. The RSI indicates further upside momentum, while the SMA and momentum indicators suggest continued bullish sentiment. The convergence of various SMAs around $2,025 also supports the bullish outlook for gold prices.
Adding additional insight, the recent rally in gold prices can be attributed to a combination of factors, including concerns about inflation, a weaker US Dollar, and uncertainty surrounding the economic recovery. Investors are likely turning to gold as a safe-haven asset in times of economic uncertainty, driving the price higher. It will be essential to monitor upcoming economic data releases and Fed meetings for further clues on the direction of XAU/USD in the coming weeks.
