Gold Price Analysis: XAU/USD hovers near 9-year high of $1,820 hit on Monday

Gold continues to trade near the nine-year high of $1,820 reached on Monday. The metal is up 20% on a year-to-date basis. 

The rally could be associated with the record monetary and fiscal stimulus lifelines launched by the major central banks and governments to counter the coronavirus-induced slowdown and the resulting negative real or inflation-adjusted government bond yield. 

The likes of Goldman Sachs and Citigroup expect the yellow metal to reach a new lifetime high above $1,911 over the next 12 months. Goldman Sachs thinks a break above $2,000 may happen if the rise in inflation is met with a muted response by the US Federal Reserve. 

While the long-term bias is bullish, in the short-term, we may see a price pullback, as key indicators like the 14-day relative strength index (RSI) and the MACD histogram have diverged in favor of the bears. 

These bearish divergences (lower highs) suggests the rally is losing momentum. As such, prices may fall back to $1,796 - the lower end of the daily chart rising wedge. A violation there would imply rising wedge breakdown, a bearish reversal pattern, and open the doors for $1,750. 

Daily chart

Trend: Bearish divergence

Technical levels