Gold might be in a late stage of the rally

16 апр.

Gold saw a pullback of nearly $100 from a high of $2,431, followed by a slight rebound, dragging the price to $2,370 per troy ounce. This increasing volatility begs the question of the market’s state. To address this, we would like to note that the rising volume has been accompanying the increasing price, which is positive (and, indeed, quite impressive, considering how much gold has run up in the past year). In addition to that, silver and some of the mining stocks within the precious metals sector began to catch up with gold recently, which could indicate the shiny metal is entering a late stage of the rally. With that said, we think there is still a significant chance for gold to run higher (likely beyond $2,500). But then, we are also well aware that certain market developments (if they play out) might hold gold down for much longer (including the stock market downturn, steady or higher interest rates for longer, etc.).

Illustration 1.01

Illustration 1.01 shows the daily chart of XAUUSD. Green arrows highlight a simultaneous rise in the price and volume.

Illustration 1.02

The weekly graph of XAUUSD depicts two multi-year resistance levels from the past, which now act as critical support levels. Following a breakout above the first level in June 2019, gold rallied nearly 51% before forming another wall of resistance at $2,075. This level was first time broken (temporarily) in late 2023 and then again in late February 2024 (now with the price staying above it); when measuring from the second breakout level at $2,075 until the recent peak of $2,431, gold rallied slightly more than 17%, potentially leaving some more upside left (though, unlikely another 30% without a significant pullback to the base).

Illustration 1.03

The daily chart of XAUUSD above shows alternative support levels derived from past peaks and troughs.

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.