Gold has been facing a glass ceiling at $2525 an ounce on the spot market, struggling to break through for the past two weeks. However, a series of smaller pullbacks and more frequent rallies towards the resistance point to impressive buying pressure in the market.
Over the past two weeks, a triangle has formed on the gold chart, with horizontal resistance and rising support. This pattern suggests that buyers are taking the initiative at higher levels, indicating a potential breakout to historical highs in the near future. It will be crucial to observe how the price behaves post-breakout.
Looking at the longer-term chart since April, we can see a trend of increasingly shallow corrections. The current consolidation phase is an oscillation around the upper boundary of the uptrend that has been in place since then. Despite the bullish sentiment, there is a divergence between the RSI and the price trend in the daily timeframe, signaling upward exhaustion.
One of the main drivers of the recent surge in the gold price has been the dollar’s weakness against major currencies, leading to an 8.5% appreciation in the ounce. However, the DXY is showing signs of attempting to reverse its direction to the upside, potentially impacting the direction of gold prices. These signals point to a potential break of resistance levels and a renewal of historical highs in the near term.
Monetary Policy Outlook
Beyond the technical analysis, the short-term fate of gold will also be influenced by the Federal Reserve’s monetary policy outlook. The market will closely monitor how much the Fed will cut interest rates before the end of the year, as this could have a significant impact on the price of gold.
The current trend in the gold market suggests that there is strong buying pressure pushing against the resistance level of $2525. If this resistance is broken, we could see a renewed momentum towards historical highs. However, it is important to remain cautious and monitor the market closely, especially considering potential shifts in the dollar’s strength and the Fed’s monetary policy decisions.