Gold prices, which are commonly indicated by XAU/USD, are displaying bullish signals. They are on track to break through the $3,400 level in the short term. Gold (XAU/USD) retook a flat 20 Simple Moving Average (SMA) right under $3,330. This price point has turned heads among industry analysts and investors alike, especially amid the current fiscal and political tumult in the United States, which is dampening expectations for demand for the US Dollar.
XAU/USD’s bullish trend is backed up by its seriously bullish performance compared to important technical drivers. As it stands, the 100 SMA is still far below the 20 SMA which shows that a strong bullish trend is in place. The daily chart picture is one of very strong momentum to the upside. XAU/USD has recovered, taking out the 61.8% Fibonacci retracement of $3,452.51-$3,247.83 at $3,374 and trading above that level currently. This kind of performance echoes the idea that the near-term outlook should be quite positive for gold prices.
Support for XAU/USD is currently positioned at $3,390.10, $3,374.50 and $3,350.00. Conversely, resistance starts at $3,403.20, followed by $3,417.90 and $3,430.35. The way these levels are positioned just shows how traders are keenly watching the price action as XAU/USD moves through this critical stage.
On the lesser time frame, technicals on the 4-hour chart have already printed signs of overbought territory. Buying pressure the Momentum indicator as highlighted below, holds an extremely steep slope which is a rare occurrence. The Relative Strength Index (RSI) has decelerated, but is still trending upwards at about 71. That means we could see gold prices continue their bull run.
While sentiment is broadly positive on XAU/USD, analysts warn that the market could be vulnerable to a plethora of external shocks. Scott Bessent strongly reaffirmed the concerns we raised about the Federal Reserve’s ability to be effective during a time of unprecedented economic peril.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” – Scott Bessent
As the fiscal and political challenges in the United States increases, so does the downward pressure on demand for the US Dollar. This environment adds to gold’s attractiveness as a safe-haven asset. XAU/USD remains well above all of its moving averages. The 20 SMA’s bullish slope and location above the longer-term SMAs tilt the risk to the upside.
With market participants closely monitoring developments within the Federal Reserve and economic indicators, XAU/USD’s potential for further gains remains in focus. The significant bounce back above two critical Fibonacci retracement levels lends support to the positive outlook on gold prices.