Gold Potentially Looking for Higher Levels this Week?
It was another positive week for the yellow metal, adding 0.3% and chalking up a fifth consecutive week in the green.
The key development on the weekly timeframe was the break and retest of resistance at $1,916 and reaching highs of $1,937, levels not seen since April 2022. Fashioning support from the aforementioned resistance places the technical spotlight on the double-top pattern’s peaks at around $2,070. However, it’s important to note that the Relative Strength Index (RSI) is at the doorstep of overbought territory, consequently further outperformance could be lethargic.
Elsewhere on the daily timeframe, the decision point at $1,867-1,886 was left unopposed last week. While still a valid area of technical interest, Quasimodo resistance is now on the radar at $1,966, accompanied by a 78.6% Fibonacci retracement at $1,973 (blue). Nevertheless, similar to the weekly chart, the daily timeframe’s RSI is registering overbought conditions, therefore the pace of buying might slow despite scope to approach resistance.
As a reminder of trend direction on the daily chart, here is where the research team stands at the moment (italics):
The trend is now technically higher. The reversal presented itself in early December last year following the break of the $1,786 previous high in November 2022. Since then, the precious metal also recently welcomed what is known as a Golden Cross, which is the 50-day simple moving average ($1,810) crossing above the 200-day simple moving average ($1,777). This is a pattern trend followers tend to watch and can signal the possibility of a long-term uptrend.
Friday’s technical briefing noted the following in terms of the H1 scale (italics):
Despite marginally violating trendline support on the H1 chart (green), drawn from the low $1,825, buyers found grip and reclaimed position north of the ascending line on Thursday. Another technical observation on the H1, which also bolsters a bullish case for the yellow metal, is that the first leg lower from $1,929 (16 January) bottomed at $1,896, while the second leg south from $1,925 (18 January) failed to form a lower low at $1,901. This informs market participants that buyers are gaining traction and a break above the local descending resistance (etched from $1,929) could be seen today.
As evident from the H1 chart, we have indeed seen the metal push higher, breaking the local descending resistance which welcomed a retest in the form of support on Friday. This—coupled with weekly price breaking/retesting breached resistance and scope to rally on both weekly and daily timeframes—bolsters the case for another leg higher and places H1 resistance on the radar at $1,939 this week.