TA of the day: Gold rises to new highs! Is there a reversal in sight?

Gold diggers – both literally and figuratively – need to be in high spirits now! 😂

Gold continues to hit new all-time highs and has breached the $2,500 mark, driven by a weaker US dollar and expectations of a Federal Reserve interest rate cut in September.

Due to its reputation as a stable investment in troubled times, geopolitical instability and economic concerns have also driven demand for gold.

Analysts predict that gold could reach $2,600 by the end of 2024 and possibly $3,000 by mid-2025.🤔

As gold reaches new highs, market sentiment for it remains bullish. However, is the rally too good to last?

Are there signs of a market top as prices continue to rise? 😟

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of XAU/USD based on the daily chart:

📈 XAU/USD (Gold) Daily Chart Technical Analysis.

Let’s analyze gold using the key technical analysis concepts covered in our forex course.

Simple Moving Averages (SMA):

• 10 period SMA: Positioned around 2,473.04. The price is currently above this level, indicating strong short-term bullish momentum. The up the slope reflects sustained short-term buying pressure.
• 50 period SMA: Positioned around 2,395.48. The price is good above this level, consolidating the ongoing medium-term uptrend. The up the slope of the 50-period SMA suggests continued strength.
• 100 period SMA: Positioned around 2,369.97. The price is above this level, confirming the medium-term optimistic momentum. The slope is upindicating continued optimism in the market.
• 200 period SMA: Positioned around 2,216.20. The price is significant above this level, highlighting strong long-term bullish momentum. The up the slope confirms the long-term uptrend.

Relative positioning of mobile media:

• 10 period SMA is above 50, 100 and 200 period SMAs, indicating a bullish short-term trend in an overall bullish environment.
• The 50 period SMA is also above 100 and 200 period SMAs, confirming consistent bullish pressure on ALL timeframes.

Relative Resistance Index (RSI):

• The RSI is currently at 64.23indicating that the market is in bullish territory but not yet overbought.
• This suggests that there may still be room for further upside before the market potentially encounters resistance.

🕵️ Key observations

Price action:

Let’s analyze the recent XAUUSD (gold) price action based on the chart:

1. Strong Uptrend: The most notable feature is the strong upward trend, particularly evident in March.
2. Series of higher highs and higher lows: Price action consistently shows higher highs and higher lows, a key characteristic of a strong uptrend.
3. Trend acceleration: The uptrend has accelerated considerably in recent weeks, showing increased bullish momentum.
4. Minimum Withdrawals: During this recent uptrend, there have been very few significant pullbacks, indicating persistent buying pressure.
5. Consolidation Breakouts: There were brief periods of consolidation followed by strong upward eruptions, particularly visible in late July and early August.
6. Bullish candles: Recent candles are predominantly bullish (green) with relatively small wicks, indicating strong buying pressure.
7. Volatility: God’s volatility has increased in recent weeks, with larger candlesticks indicating strong directional moves.
8. Go beyond the psychological level: The price recently crossed the significant psychological level of 2,500, which is a bullish signal.
9. New All-Time Highs: Gold recently broke through previous resistance levels to hit new all-time highs.

Key Levels:

• 2,500: Important psychological level recently broken!
• 2,400: Significant level of support!

Support and resistance levels:

• Potential resistance: Psychological level at 2,550.
• Immediate resistance: Current all-time high at 2531.
• Immediate support: Around 2,470 (10 SMA).
• Strong support: 2,400 (psychological level and near 50 SMA).

Relative Resistance Index (RSI):

• It’s getting close to overbought territory, but it’s not there yet.
• It exhibits strong momentum while allowing room for further growth.
• There are no signs of exhaustion or divergence in terms of RSI.

🤔 Potential commercial scenarios

Is gold a buy or a sell?

The following business scenarios are provided for educational purposes only. As they do not include complete risk management practices, they are not intended to serve as actual trading recommendations, but only food for thought to help you generate your own trading idea.

Long bias:

• Point of consideration: Consider entering a long position if the price finds support near the 10-period SMA at 2,473.04 or a pullback to the 50-period SMA around 2,395.48. A strong break above the 2,530 level could also provide a buying opportunity.
• Invalidation point: Consider setting a stop-loss below the 50-period SMA at around 2,390 to manage risk.
• Potential target: Look for a move to 2,550 or higher if the uptrend continues.

Motivation: Strong bullish momentum and proximity to key psychological levels suggest further upside potential, with the 2,500 level a crucial area to watch. Continued momentum could push the price towards 2,550 and above!

Short bias:

• Point of consideration: Consider entering a short position if the price shows signs of rejection around the 2,500 resistance level or if there is a bearish divergence in the RSI.
• Invalidation point: Consider setting a stop-loss above the recent high of around 2,515 to manage risk.
• Potential target: The initial target could be the 10-period SMA at 2,473.04, with further downside potential towards the 50-period SMA at 2,395.48.

Motivation: Approaching the overbought RSI levels suggests a possible pullback or consolidation. A failure to hold at the 2,500 level could signal a short-term reversal. A pullback could find support at the 10 SMA (2,473) or 50 SMA (2,395).

📝 Summary of TAOTD

• Current position: The price is in a strong upward trend, testing the psychological resistance at 2,500. Bullish momentum is supported by the position above all major SMAs and a moderately strong RSI.
• Trend: The overall trend is bullish, with price well above the 200-period SMA, confirming long-term strength. Short- and medium-term trends are also optimistic.
• Key levels: Support at 2,473 (10-period SMA) and 2,395 (50-period SMA), with resistance at recent all-time high (2531).
• momentum: RSI indicates strong bullish momentum with upside potential before reaching overbought conditions.

Gold’s Technical Picture: Strongly Bullish

Recent price action suggests that a very strong optimistic feelingt on the gold market.

The multiple breakouts to new all-time highs and the break above the psychological level of 2,500 all indicate that buyers are firmly in control.

The series of higher highs and higher lows, coupled with price remaining consistently above key moving averages, strengthens buyer control.

The RSI, while elevated, is not yet in extreme overbought territory, suggesting potential for further growth.

However, given the scale of the recent rally. you should be aware that such strong moves can sometimes be followed by pullbacks or consolidations.

The lack of significant withdrawals in the recent trend might suggest Careful in the very short term.

A breakout above the current high could lead to additional earnings, while a fall below 10 SMA could signal a short-term correction.

Overall, the market structure suggests that gold is in a robust bullish phase.

The overall structure would remain bullish as long as the series of higher minimums is maintained and the price remains above key moving averages. 👍