Gold Extends Rally as XAU/USD Targets $4,773, but Overbought RSI Signals Pullback Risk
Gold remains firmly supported near its highest levels since mid-May as lower US Treasury yields and reduced expectations of an imminent Federal Reserve rate hike strengthen demand for the precious metal.
Gold continued to trade with a bullish bias on Monday, with XAU/USD holding near its highest levels since mid-May. The precious metal remains supported by lower US Treasury yields and fading expectations that the Federal Reserve will deliver another interest-rate increase in the near term.
Lower bond yields tend to support gold because they reduce the opportunity cost of holding non-yielding assets. At the same time, geopolitical tensions surrounding Iran are sustaining demand for safe-haven assets, although those same concerns are also providing some support to the US Dollar and limiting the extent of gold's advance.
On the daily chart, XAU/USD was trading around $4,647.02, well above its 100-day simple moving average at $4,379.73 and its 200-day simple moving average at $4,516.92. Trading above both major moving averages reinforces the broader bullish technical structure.
Gold has also reclaimed a previously broken downward trendline near $4,389.60. However, the daily Relative Strength Index stood at 72.03, placing the market in overbought territory and increasing the possibility of a short-term correction.
On the upside, the first major resistance level is located near $4,773.00. A sustained break above this area could bring the next resistance zone around $4,890.00 into focus.
On the downside, the 200-day simple moving average near $4,516.92 represents an important support area. Below that, the former trendline near $4,389.60 and the 100-day moving average around $4,379.73 form a deeper support zone.
The one-hour chart also maintains a bullish near-term structure. XAU/USD was trading around $4,649.38, above the 100-period simple moving average at $4,492.92 and the 200-period moving average at $4,440.88.
Overall, the technical structure remains bullish across both the daily and hourly timeframes. However, elevated RSI readings indicate that traders should also account for the possibility of a short-term pullback before another attempt to extend the advance.
Key Takeaways
- Gold remains in a bullish trend near its highest levels since mid-May.
- Lower US Treasury yields and fading Fed rate-hike expectations are supporting XAU/USD.
- Major resistance is located near $4,773, followed by $4,890.
- The daily RSI at 72.03 signals overbought conditions and increases short-term correction risk.
- The 200-day SMA near $4,516.92 is an important support level.
- The broader bullish structure remains intact while gold stays above its key moving averages.
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