Can we trust the Gold rally?

XAUUSD, H4 and Daily

Gold prices peaked at $1,230.51 breaking month’s range but most precisely breaking the Thursday’s high at 1226.31, which was one of the most volatile day since April, with close price $30.00 above opening. Flows into the yellow metal kicked in from the Asian open, as falling global equity markets, the US/China trade war, and most recently, tensions between the US and Saudi Arabia have seen gold revert to its traditional safe-haven role.

Gold was moving within $1,180.00- $1,208.00 range since the mid of August. Therefore the hold above this range for a third consecutive day is significant for the future performance of the commodity, as it presents bullish sentiment. But is this sustainable enough?

In the near term, the commodity seems already overbought, as the price is moving around the R3 level set from Pivot Point analysis. In the 4-hour chart, the Bollinger bands have been expanded due to the recent high volatility. the Bollinger Bands expansion, could signals that the asset is trending in the direction of the expansion overall (i.e. to the upside), but could also suggest small pullbacks in the near term. Therefore in the short-term corrections to the downside could be seen.

Momentum indicators are presenting increasing bullish bias for the XAUUSD, with the RSI consolidating around overbought barrier, while MACD surpassed its signal line, amplifying further bullish bias towards the next Resistance level. The next resistance level is set at the 38.2% Fibonacci retracement, at $1,238.00 from $1,365.00 peak down to $1,173.78. A jump above this hurdle would be a surprise that could boost the market to the next key level at July’s high at $1,265.88.

The Daily momentum indicators also support the positive outlook for gold, as RSI crossed the neutral zone, currently it is at 63 and still sloping positively. MACD turn into positive above its signal line. However the bullish outlook for gold is still uncertain as the asset needs to build a strong support area around the $1,210.00- $1,214.00 area, in order to claim that this 4-month drift has reach to an end.

Nevertheless, fundamentals are still in play, as the  Fed rate increases are still to come, which should support the dollar, further gold price declines can be expected.