Gold (XAU/USD) saw another day of solid advance and settled Wednesday near the highest levels since September 2011 around $1942. The narrative behind gold’s surge remained the massive central banks’ stimulus, growing economic uncertainty over COVID-19 and the prevalence of negative real bond yield, which continued to weigh heavily on the US dollar. The US-China escalation and hopes of the US fiscal aid also favored the precious metal.
On Tuesday, gold extended the vertical rise into an eighth straight session and recorded a new life-time high at $1981.34. The spot built on Wednesday’s advance, as the bulls extended control after the price surpassed previous record high near $1921. The spot, however, witnessed a quick corrective pullback and tested the key support near $1933 levels. The sharp move lower can be mainly attributed to broad-based US dollar comeback, as investors resorted to profit-taking ahead of the FOMC monetary policy decision due to announced on Wednesday. The US dollar recovery could be short-lived, as markets price in a dovish Fed announcement, in the face of stalling economic recovery stalls due to the coronavirus resurgence.
As observed in the hourly chart, the quick $35 retracement from near-record highs brought the price back to test the critical 21-hourly Simple Moving Average (HMA) at $1946, where it now wavers.
The spot pierced below the key 21-HMA support but managed to quickly reclaim, which keeps the buyers still hopeful.
The hourly Relative Strength Index (RSI) has turned south after the drop and looks to breach midline, suggesting the corrective pullback could extend.
Therefore, the next downside target is seen at the $1933.40 (daily low), below which the bullish 50-HMA at $1923.85 could be tested.
Should the selling pressure accelerate further, a test of the $1900 mark will be imminent. That level is the convergence of the 100-HMA and round figure.
On the flip side, the $1950 psychological level will continue to offer stiff resistance, above which the fresh record high will be put at risk, as the bulls will then look to conquer the $2000 mark.
Overall, for the bullish momentum to sustain in the near-term, the price needs to give a daily closing above the 21-HMA.
Reprinted from fxstreet, the copyrights all reserved by the original author.
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