- Gold bulls could face exhaustion after the 4-day surge.
- Economic rebound hopes on stimulus to keep dollar pressured.
- Rising wedge hurdle and overbought RSI on daily chart signal caution.
Gold (XAU/USD) built on the recent upsurge and refreshed nine-year highs at $1866.90 earlier in the Asian session. The bright metal rose about 1.30% on Tuesday on the back of the relentless sell-off in the US dollar across the board, fuelled by the expectation of a quicker economic turnaround while investors cheered the EU fiscal deal and additional US stimulus talks. Gold also drew support from escalating US-China row after US Secretary of State Mike Pompeo said they want to build a global coalition to counter China, accusing Beijing of exploiting the outbreak to feed its own motives.
Gold, further, tracked the rally in Silver, which recorded fresh seven-year highs just shy of the 23 level. In the day ahead, the precious metal could see a brief consolidative phase, as the bulls take a breather after the fourth straight day of gains. Moreover, any disappointment in the US housing data and worrisome COVID-19 stats could weigh on the broader market sentiment and propel a dollar comeback. In such a case, gold could risk a correction before it resumes its uptrend towards the record high of $1920.
Short-term technical outlook
Gold: Daily chart
The daily chart of gold signals caution, as the price nears the four-month-long rising wedge resistance at $1869. Meanwhile, the daily Relative Strength Index (RSI) has entered the overbought territory for the first time since end-February, which could ring an alarm to the buyers.
Therefore, the bright metal risks a corrective move lower from a technical perspective while investors may resort to profit-taking after the robust rise.
The price could reverse towards last week’s strong resistance zone around $1818-20 level in the near-term should it fail to resist above the intraday low of $1840.66.
The next support awaits at $1803.87, which is the critical rising wedge support. A break below the latter will validate the formation and call for a reversal in the ongoing bullish trend.
The upward-sloping 21-daily Simple Moving Average (DMA) at $1795.69 will be the last resort for the bulls.
However, if the gold buyers defy the warnings then $1880 could be put to test following a break above the rising wedge hurdle.
Gold: Additional levels to consider
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