Gold diggers—both literal and figurative—must be in high spirits right now! 😂

Gold continues to make new all-time highs and has surged past the $2,500 mark, driven by a weaker U.S. dollar and expectations of a Federal Reserve interest rate cut in September.

Due to its reputation as a stable investment during turbulent times, geopolitical instability and economic concerns have also driven gold demand.

Analysts predict that gold could reach $2,600 by the end of 2024 and possibly $3,000 by mid-2025.🤔

As gold reaches new heights, the market sentiment for it remains bullish. However, is the rally too good to last?

Are signs of a market top emerging as prices continue to climb? 😟

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of XAU/USD based on the daily chart:

📈 Technical Analysis of XAU/USD (Gold) Daily Chart

Let’s analyze gold using key technical analysis concepts covered in our forex course.

Simple Moving Averages (SMAs):

• 10-period SMA: Positioned around 2,473.04. The price is currently above this level, indicating strong short-term bullish momentum. The upward slope reflects sustained buying pressure in the short term.
• 50-period SMA: Positioned around 2,395.48. The price is well above this level, reinforcing the ongoing medium-term bullish trend. The upward slope of the 50-period SMA suggests continued strength.
• 100-period SMA: Positioned around 2,369.97. The price is above this level, confirming medium-term bullish momentum. The slope is upward, indicating continued optimism in the market.
• 200-period SMA: Positioned around 2,216.20. The price is significantly above this level, highlighting strong long-term bullish momentum. The upward slope confirms the long-term uptrend.

Relative Positioning of Moving Averages:

• The 10-period SMA is above the 50-period, 100-period, and 200-period SMAs, indicating a robust short-term bullish trend within an overall bullish environment.
• The 50-period SMA is also above the 100-period and 200-period SMAs, confirming consistent bullish pressure across ALL timeframes.

Relative Strength Index (RSI):

• The RSI is currently at 64.23, indicating that the market is in bullish territory but not yet overbought.
• This suggests that there could still be room for further upward movement before the market potentially encounters resistance.

🕵️ Key Observations

Price Action:

Let’s analyze the recent price action of XAUUSD (Gold) based on the chart:

1. Strong Uptrend: The most notable feature is the strong uptrend, particularly evident since March.
2. Series of Higher Highs and Higher Lows: The price action consistently shows higher highs and higher lows, a key characteristic of a strong uptrend.
3. Acceleration of Trend: The uptrend has noticeably accelerated in the last few weeks, showing increased bullish momentum.
4. Minimal Retracements: During this recent uptrend, there have been very few significant pullbacks, indicating persistent buying pressure.
5. Consolidation Breakouts: There have been short periods of consolidation followed by strong breakouts to the upside, particularly visible in late July and early August.
6. Bullish Candles: Recent candles are predominantly bullish (green), with relatively small wicks, indicating strong buying pressure.
7. Volatility: God’s volatility increased in recent weeks, with larger candle bodies indicating strong directional moves.
8. Break Above Psychological Level: The price has recently broken above the significant psychological level of 2,500, which is a bullish signal.
9. New All-Time Highs: Gold has recently broken through previous resistance levels to reach new all-time highs.

Key Levels:

• 2,500: Important psychological level recently broken!
• 2,400: Significant support level!

Support and Resistance Levels:

• Potential resistance: Psychological level at 2,550.
• Immediate resistance: Current all-time high at 2531.
• Immediate support: Around 2,470 (10 SMA).
• Strong support: 2,400 (psychological level and near 50 SMA).

Relative Strength Index (RSI):

• Approaching overbought territory but not yet there.
• Shows strong momentum while allowing room for further upside.
• No signs of exhaustion or divergence on the RSI.

🤔 Potential Trade Scenarios

Is gold a buy or sell?

The following trade scenarios are provided solely for educational purposes. Since they don’t include full risk management practices, they are not intended to serve as actual trade recommendations, but merely food for thought to help you generate your own trade idea.

Long Bias:

• Consideration Point: Consider entering a long position if the price finds support near the 10-period SMA at 2,473.04 or on a pullback to the 50-period SMA around 2,395.48. A strong breakout above the 2,530 level could also provide a buying opportunity.
• Invalidation Point: Consider setting a stop-loss below the 50-period SMA at around 2,390 to manage risk.
• Potential Target: Look for a move towards 2,550 or higher if the uptrend continues.

Rationale: The strong bullish momentum and the proximity to key psychological levels suggest further upside potential, with the 2,500 level being a crucial area to watch. Continued momentum could push the price towards 2,550 and beyond!

Short Bias:

• Consideration Point: Consider entering a short position if the price shows signs of rejection around the 2,500 resistance level or if there is a bearish divergence in the RSI.
• Invalidation Point: Consider setting a stop-loss above the recent high at around 2,515 to manage risk.
• Potential Target: Initial target could be the 10-period SMA at 2,473.04, with further downside potential towards the 50-period SMA at 2,395.48.

Rationale: The proximity to the overbought RSI levels suggests a possible pullback or consolidation. A failure to hold at the 2,500 level could signal a short-term reversal. A pullback might find support at the 10 SMA (2,473) or 50 SMA (2,395).

📝 TAOTD Summary

• Current Position: The price is in a strong uptrend, testing the psychological resistance at 2,500. The bullish momentum is supported by the position above all major SMAs and a moderately strong RSI.
• Trend: The overall trend is bullish, with the price well above the 200-period SMA, confirming long-term strength. The short-term and medium-term trends are also bullish.
• Key Levels: Support at 2,473 (10-period SMA) and 2,395 (50-period SMA), with resistance at recent all-time high (2531).
• Momentum: The RSI indicates strong bullish momentum, with potential room for further upside before reaching overbought conditions.

Gold’s Technical Picture: Strongly Bullish

The recent price action suggests very strong bullish sentiment in the gold market.

The multiple breakouts to new all-time highs, and the break above the 2,500 psychological level all indicate that buyers are firmly in control.

The series of higher highs and higher lows, coupled with the price consistently staying above key moving averages, reinforces buyer control.

The RSI, while elevated, is not yet in extreme overbought territory, suggesting potential for further upside.

However, given the extent of the recent rally. you should be aware that such strong moves can sometimes be followed by pullbacks or consolidations.

The lack of significant retracements in the recent trend might suggest caution in the very short term.

A breakout above the current high could lead to further gains, while a fall below the 10 SMA might signal a short-term correction.

Overall, the market structure suggests that gold is in a robust bullish phase.

The overall structure would remain bullish as long as the series of higher lows is maintained and the price stays above key moving averages. 👍