XAU/USD, the most popular market shorthand for the current spot price of gold, has rallied for a second day. On Monday, it hit a stunning $3,730 per troy ounce. This trend has been propelled by bullish market sentiment and speculation for gold’s future performance. As investors remain optimistic, the price of gold continues to defy previous resistance levels, trading well above all moving averages.
The recent rise in XAU/USD shows an excellent example of very strong upward momentum. On one side of the equation, the outlook for future earnings is starting to look pretty rosy. Moreover, the Relative Strength Index (RSI) indicator for the commodity just recently rebounded off of its 70 overbought line. This implies that, despite the asset being overvalued, it is drawing in quite a lot of hot-money traffic.
Throughout the American trading session, XAU/USD stayed even higher, indicating that traders’ confidence in the market remains strong. Market analysts are saying by at least one measure, technical indicators on the daily chart suggest more advances could be on the way over the next few days.
Support and resistance levels are essential in analyzing the current market landscape for XAU/USD. The commodity has built a floor of support at $3,724.10, $3,707.80 and $3,691.50. On the other hand, resistance levels are $3,750.00, $3,765.00 and $3,780.00. These ceilings will be important as investors seek signs of where the gold market may head next.
Technical market analysts are keenly aware of the placement and direction of the different Simple Moving Averages (SMA) in relation to XAU/USD price action. The 20 SMA currently hovers around $3,674.00, while both the 100 and 200 SMAs have accelerated northward but remain below the 20 SMA. Such positioning would ordinarily be indicative of a bullish trend, with XAU/USD now trading well above all of its moving averages.
Moreover, the Momentum oscillator for XAU/USD is consolidating well above its 100 line, reflecting strong upside pressure. With no directional strength on the Momentum indicator, one has to wonder how sustainable this upward movement is.
For the balance of the week, several key American economic indicators are due. This data would have a big impact on speculative bet against XAU/USD. Investors will be closely watching this data to help validate their bullish view or adjust their game plan for gold accordingly.