In a rare development in the gold market, XAU/USD has managed to recapture that $4,200 level. This recovery resilience shines bright against the backdrop of expectations that the US government shutdown could soon be over. On Wednesday, during the American trading session, spot gold prices came within an eyelash of a key psychological barrier. This high-volume movement signifies notable bullish sentiment among traders. Americans are understandably tired of hearing about yet another government shutdown. Counter to this, the immediate prospect of major official data releases in the United States is adding to the upward price pressure.
The recent performance of XAU/USD suggests a positive technical setup. The price remains well above the 20-period, 100-period and 200-period Simple Moving Averages (SMAs). Given all that, this very strong position points bullish in the short term. Meanwhile the 20-period SMA has jumped above both the 100-period and 200-period SMAs. This change is reflected in a bullish gold price sentiment. This positive alignment of indicators prevents the risk from shifting to the downside, indicating further upside progress for XAU/USD is likely.
Closer examination reveals that the 100-period SMA has only recently leveled out following a recent downtrend. At the same time, the 200-period SMA is moving to the upside, adding to the bullish pressure on XAU/USD. Therefore, gold prices need to remain above these important SMAs to maintain bullish momentum. Should a pullback occur, we’d see firmer support at the 200-period SMA (currently $4,042.81) and the 100-period SMA ($4,035.33). A clean break underneath this support zone would put the kibosh on the bullish potential of XAU/USD in a big way.
Even momentum indicators are showing that in every way, it is a great bullish sentiment. The Momentum indicator has turned back upward, moving back above the 100 line, indicating the presence of strong ongoing buying pressure. The Relative Strength Index (RSI) is at 72. This reveals that the bullish force is still positive and upward, but is beginning to lose some of its upward strength. Still, this balance may reflect some measured optimism from traders about XAU/USD’s short-term performance.
Changing market dynamics surrounding the upcoming temporary end of the US government shutdown are putting major pressures on investor sentiment. Analysts suggest that a resolution could lead to increased economic activity and market stability, which may impact gold prices accordingly. Traders are preparing for a barrage of official United States data due next week. Such news would be enough to turn market sentiment against the dollar and bullish on gold.