The gold spot price (XAUUSD) kicked off the new week with vigour as traders took some risk off the table amid ongoing geopolitical tensions in the Middle East. The heightened uncertainties have sparked a surge in the appeal of safe-haven assets, gaining momentum particularly after a drone strike near the Syrian border claimed the lives of three US service members at a base in Jordan.
As the spot price continues its upward momentum, there are promising indications of a potential breakout from a technical pattern, hinting at the possibility of a new directional trend. Yet, the week holds a series of pivotal data updates that could reshape this trajectory. The Federal Reserve’s interest rate decision on Wednesday takes centre stage, with market watchers eagerly awaiting commentary for clues about the initiation of the easing cycle.
Adding to the anticipation, Friday’s Non-Farm Payroll (NFP) report promises to be a game-changer. This influential labour market report has the potential to shift market sentiment regarding the Federal Reserve’s monetary stance. An exciting week lies ahead in the gold market, where geopolitical tensions and key data releases converge to influence the precious metal’s journey.
Technical
On the 4H chart, the price action has broken through the dynamic resistance of a symmetrical triangle, hinting at the formation of a new bullish trend. However, psychological resistance at the Fibonacci midpoint of $2,031.83/ounce and a supply zone near $2,036.77/ounce presents barriers to a sustainable bullish run.
If these resistance levels hold, a retracement could occur to retest the breakout level at around $2,024.50/ounce. This could be crucial, as a bullish bounce could confirm the breakout. In this case, the 61.8% Fibonacci golden ratio could be important at $2,038.98/ounce, with a breakout opening the possibility for a move toward $2,043.50/ounce.
However, if the price action falls below the $2,024.50/ounce level, it could signal a fake-out, potentially driving the price back within the triangle toward $2,019.62/ounce. This could shift the dynamics of the markets, as the breakdown below the 25-SMA (green line) and 50-SMA (blue line) could suggest a bearish tilt, making the triangle support near $2,013.32/ounce vulnerable to a breakdown.
Summary
The gold spot price has found renewed shine as its safe-haven appeal drew traders in amid escalating tensions in the Middle East. The optimism has teased a breakout from the symmetrical triangle, but the price faces a stiff hurdle at $2,031.83/ounce and $2,036.77/ounce to confirm the bullish trend.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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