After rallying sharply on Monday, gold got another shot in the arm during the first half of Tuesday’s session. As well as a weaker US dollar, a drop in equity prices also helped to boost the appeal of the safe-haven metal. The question now is, can it make a new all-time high above $3,500? Here’s my take, says Fawad Razaqzada, technical analyst at Trading Candles.
This week’s mild risk-off tone and weakness in bonds and the dollar all suggest that the recent burst of optimism — largely driven by a few US trade concessions — may already be running out of steam. Several companies have delivered cautionary notes as reminders that the full impact of the ongoing tariff spat is likely to make itself felt in the months ahead.
With stocks easing back, gold is again shining brightly. The technical outlook on gold remains positive until such a time that we see lower lows and lower highs. The recent two-week consolidation helped to unwind some of the overbought condition on gold’s momentum indicators such as the RSI. That allowed dip buyers to step back in as prices tested key support levels.
With the renewed buying interest causing a few short-term resistance levels to break and gold still looking strong, I wouldn’t rule out the possibility of it seeing new highs. That said, there are a couple of interim resistance levels to watch out for that may trigger at least some profit taking.
The next round handle of $3,400 is sandwiched between the 61.8% (at $3,386) and 78.6% (at $3,436) Fibonacci retracement levels against the all-time high of $3,500.
On the downside, there are lots of support levels now that must break before the bears could have another go at exerting real pressure. The first important level of short-term support is now seen around $3,370, followed by Monday’s high of $3,337. Below that, you have support at $3,300 and then $3,269.
