Recently, gold has been struggling to surpass the $2525 per ounce mark on the spot market. Despite facing resistance at this level, there have been numerous attempts to break through, indicating strong buying pressure. A pattern of diminishing pullbacks and increasing rallies suggests a potential breakout to historical highs in the near future.
Examining the gold chart, we can observe a pattern of horizontal resistance and rising support forming a triangle over the past two weeks. This pattern reflects a trend of buyers entering the market at higher price levels. Furthermore, a longer-term analysis since April reveals a consistent trend of shallow corrections. The current consolidation appears to be oscillating around the upper boundary of the uptrend, indicating a bullish sentiment.
In the daily timeframe, there is a noticeable divergence between the Relative Strength Index (RSI) and the price trend, signaling a potential exhaustion in the upward movement. However, history shows that similar situations in the past have led to strong uptrends rather than short-term corrections. This divergence may indicate a temporary pause before further upside momentum.
A key driver of the recent gold price appreciation has been the US dollar’s depreciation against major currencies, resulting in an 8.5% increase in the price per ounce. Conversely, the Dollar Index (DXY) is showing signs of a potential reversal towards the upside as it reaches the lower end of its trading range. These factors suggest a potential breakout past resistance levels, leading to renewed historical highs.
Looking beyond technical indicators, gold’s short-term performance will also be influenced by the Federal Reserve’s monetary policy decisions. The market will closely monitor any potential interest rate cuts by the Fed, which could impact the trajectory of gold prices in the coming months.
While gold prices are currently facing resistance at $2525 per ounce, the underlying market dynamics and technical indicators suggest a potential breakout to historical highs. Traders and investors should closely monitor key levels and economic developments to capitalize on potential opportunities in the gold market.