XAU/USD Current price: $2,117.90

  • Spot Gold extended its recent rally, gaining upward momentum with Wall Street’s opening.
  • The soft tone of government bond yields aids XAU/USD on its way north.
  • XAU/USD is extremely overbought in the near term, but could keep rallying towards 2,135.

Spot Gold runs past the $2,100 mark on Monday, extending its Friday rally although at a slower pace. XAU/USD added roughly $55.00 in the last trading day of the previous week, its largest intraday gain since last December.

The bright metal began advancing on Thursday, following the release of in-line with expectations United States (US) inflation figures. The Federal Reserve’s (Fed) favorite inflation figure, the   January Core Personal Consumption Expenditures (PCE) Price Index rose 0.4% for the month and 2.8% from a year ago, posting the slowest annual increase since March 2021. But it also brought relief, as the hotter-than-anticipated Consumer Price Index (CPI) released beforehand spurred speculation price pressures would be much higher.

The rally continued on Friday when the US published the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI). The index fell to 47.9 in February, missing the 49.5 anticipated while below the previous 49.1. The figures revived concerns about the slowing economy, although not enough to change bets on when the Fed will move forward with rate cuts. Up to date, the first move is not expected before June, with speculative interest hoping policymakers will deliver fresh clues when they meet in mid-March.

 Also on Friday, Treasury yields edged sharply lower, further weighing on the US Dollar against the bright metal. At the beginning of the new week, yields are slowly grinding higher, although the 10-year note currently offers 4.22%, not enough to change XAU/USD direction.

XAU/USD short-term technical outlook

The daily chart for XAU/USD shows it pressures intraday highs around $2,118, not far from the record high posted in December at $2,134.57. Technical readings in the daily chart show indicators heading north almost vertically and within the overbought territory without signs of bullish exhaustion. At the same time, the pair is developing roughly $90 above a now bullish 20 Simple Moving Average (SMA) which accelerates north above also bullish longer ones.

In the near term, the risk also skews to the upside despite extreme conditions. The Relative Strength Index (RSI) indicator aims higher at around 86, while the Momentum indicator maintains its sharp bullish slope at levels not seen in over a year. At the same time, the 20 SMA accelerated north far below the current level, while the 100 and 200 SMAs also gain upward traction well-below the shorter one, converging around $2,025.

Support levels: 2,120.50 2,134.60 2,150.00

Resistance levels: 2,107.40 2,096.90 2,084.50

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