Commodities Analysis & Opinion

Gold Reaches Highest Level Since April Amid Risk Aversion

 

Gold prices advanced sharply on Thursday as the yellow metal regained its appeal against a backdrop of risk aversion. Despite its safe-haven status and a slight increase in U.S. yields, the dollar fell upon gold’s strength.

At the time of writing, the spot price XAU/USD is trading at the $1,930 area, recording a 1.35% daily gain following three consecutive daily declines. The metal has also printed a new nine-month high of $1,935 by the end of the New York session.

Disappointing macroeconomic data and hawkish comments from major central banks have revived fears of a U.S. recession, which at the same time, triggered risk aversion amongst traders. Nevertheless, U.S. yields edged a tad higher on Thursday after the previous day’s decline, but Wall Street indexes traded in the red, with the Dow Jones Industrial Average posting its third fall in a row.

XAU/USD Daily Chart

From a technical perspective, the XAU/USD pair holds a positive short-term bias according to indicators on the daily chart. However, the Relative Strength Index (RSI) has already entered into overbought territory, which might signal a phase of consolidation, or a limited correction, before another run higher.

On the upside, the next bullish target for the metal is seen at the 78.6% retracement of the $2,070 – $1,615 decline, standing at $1,973, followed by the $2,000 threshold, the last milestone ahead of the mentioned 2022 high at $2,070. On the flip side, pullbacks should find buyers at around the $1,900 level. Loss of this mark would expose the 20-day SMA at $1,860.

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