XAU/USD extends rally, how high can it go?

  • The price of gold resumes its advance amid growing tensions in Eastern Europe.
  • Mixed US data had no impact on the bright metal as the focus remains on sentiment.
  • XAU/USD is breaking out of solid static resistance around $1960 with a short-term bullish stance.$

The price of gold rallied after the open on Wall Street to a new weekly high of $1,965.74 a troy ounce, following headlines that the US along with the G7 announced that any gold transactions involving the Russia’s central bank is subject to existing sanctions, according to a senior US administration official. At the moment, XAU/USD retains most of its intraday gains and remains close to the mentioned high, suggesting that the bulls have regained control of the shiny metal, regardless of a rally in sentiment.

Meanwhile, US stocks rallied, extending intraday gains on hopes of a diplomatic solution to the Eastern European crisis. Headlines hinted at progress in the ceasefire talks coming from Ukraine’s President’s aide Andriy Yemrk, who expressed cautious optimism. On the other hand, Western nations continue to pile up sanctions against Moscow.

Earlier in the day, a sour market mood fueled demand for XAU/USD amid headlines coming from the war front. US President Joe Biden has met with other European leaders to discuss the situation and, together with NATO, they are preparing for the risk of Moscow launching a nuclear attack. They have also discussed helping Ukraine with anti-ship missiles.

Sentiment improved a bit after headlines said they would announce a major initiative to send direct shipments of liquefied natural gas to Europe, to replace what usually comes from sanctioned Russia.

Gold Price Technical Outlook

Gold price is now trading comfortably above the 38.2% retracement of the rally from $1,799.38/$2,070.50 to around $1,960.00. The shiny metal is up for the second day in a row, currently crossing above a slightly bullish 20 DMA. Technical indicators on the daily chart fail to confirm a bullish continuation as Momentum heads lower within neutral levels while RSI indicator remains stable around 55.

XAU/USD turned bullish in the short term, and according to the 4-hour chart, which shows that the price is defying the bears’ determination around the 100 SMA, while the 20 SMA recovers below the current level.

Now that the $1,960 level has been broken, the next relevant resistance level for the price of gold is $1,970.03, the daily low of March 10, followed by the $1,992.00 price zone. Support levels are at the daily low of $1,937.33 and the next Fibonacci support is at $1,925.20.

Source: Fx Street

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