Gold has been attempting to break through the glass ceiling at $2525 an ounce on the spot market for the past two weeks. The consistent battle between pullbacks and rallies near this resistance level indicates strong buying pressure. If this trend continues, we can anticipate a breakout to historical highs in the near future.
A triangle pattern of horizontal resistance and rising support has formed on the gold chart over the past two weeks. This pattern suggests that buyers are becoming more active at higher levels. Looking at the longer-term chart since April, we can observe a trend of shallower corrections, indicating a bullish sentiment. The current consolidation is maintaining levels above the uptrend boundary established in April.
In the daily timeframe, a divergence between the RSI and the price trend is evident, signaling potential upward exhaustion. However, historical data shows that similar situations have led to strong uptrends rather than immediate reversals. The recent weakness of the US dollar against major currencies has been a key driver in the 8.5% appreciation of gold prices. But as the DXY attempts to reverse its downward trend, there may be a shift in the dynamics of gold prices.
Apart from technical analysis, the Federal Reserve’s monetary policy outlook will play a crucial role in determining the short-term fate of gold prices. Any decisions regarding interest rate cuts could significantly impact the direction of gold prices before the end of the year.
The gold market is currently poised for a potential breakout to historical highs, fueled by strong buying pressure, chart patterns, and external market factors. While the resistance at $2525 remains a key level to watch, the overall trend suggests a bullish sentiment in the near term. Investors should keep a close eye on both technical indicators and fundamental factors to make informed decisions in the gold market.
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