Gold remains elevated, as traders support the precious metal above $1,300 for the last two weeks. Gold has seen demand on an overly dovish Federal Reserve, which looks to prolong their near-zero interest rate policy that has been employed for the last six years. This has caused the US dollar to steadily weaken, which has supported precious metals.
“With continued dollar weakness and various ongoing problems around the world, the precious metals seem to be attracting some fresh attention,” said David Govett, head of precious metals at Marex Spectron Group. The lingering affects of geopolitical turmoil in Iraq has caused traders to hold on to the recent bullish momentum.
However, gold has been trading in a technical overbought condition over the last week, and price action is beginning to consolidate. Xia Yingying, analyst at Nanhua Futures Co., said “the weaker dollar has aided the ascent but gold is now looking increasingly overbought and the rally has put off price-sensitive physical buyers.”
Price action is currently resting on support seen at $1,326.90, following a test of resistance at $1,332.5. A close above this resistance level will likely cause a breakout to $1,350 per ounce.
A near-term pullback on profit taking should take place and reduce the overbought technicals in order for the next leg higher. The RSI has held between 69 and 71 since the latest FOMC minutes.
A price action breakdown at support would cause gold to test lower levels of support at $1,321.50 and the 200 EMA at $1,311.