Market update: gold rally pauses after hitting new high, amid growing demand

Gold retreats after tagging 1.618 Fibonacci extension

The weekly gold chart showcases the precious metal’s bullish continuation, taking out numerous all-time highs with ease. The prospect of fewer rate cuts from the Fed and a stronger US dollar have hardly affected the high-flying commodity, which continues to thrive on solid central bank buying; and a pickup in retail purchases from Chinese citizens.

With gold breaking new ground, resistance targets are difficult to come by. Therefore, the 1.618% extension of the major 2020 to 2022 major decline helps project the next upside challenge at $2360. Price action does appear to have pulled away from the level, but the move is minor at this juncture.

Gold weekly chart

The daily chart portrays the extent to which this market is overheating, with the RSI continuing to trade in overbought territory. Prices trade well above both the 50 and 200-day simple moving averages, a bullish landscape for the metal.

Today, gold appears to be stabilising after yesterday’s hot CPI data which propelled yields and the dollar higher – effectively adding a premium to the price of gold for overseas buyers.

The sheer pace of the advance suggests the invalidation levels for the bullish outlook appear at the prior all-time high of $2195. Even a move to the $2222 level wouldn’t necessarily rule out a further bullish move, but it may prompt a reassessment of the bullish bias.

Gold daily chart

Silver hits a prior, longer-term zone of resistance

Silver, like gold, continues its bullish advance, but has recently hit a zone of resistance that appeared in late 2020, and early 2021. The zone appears around $28.40 and capped silver prices around the Covid boom. The next target to the upside is $30.10 which represents a full retracement of the 2021 to 2022 decline.

Should the level propel bulls from here, the 78.6% retracement comes into play at $27.41, followed by $26.10.

Silver weekly chart

The daily chart hones in on recent price action, which appears to stabilise beneath the zone of resistance. Notably, the RSI flashes red as silver continues to trade in overbought territory, suggesting bulls may need to catch their breath.

Silver daily chart

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