Comments from the Federal Reserve caused gold prices to rise by 3%, but the dollar's recovery in the latter half of last Thursday reduced this increase to just 0.5%. Technically, the outlook remains uncertain, but fundamentally, the situation still leans towards the bullish side.
Alex Kuptsikevich, a senior analyst at FxPro, noted: On Thursday morning, the price of gold fell to $2222 due to weak liquidity and stop-loss orders being triggered, squeezing short positions out of the market. Stabilizing above $2200 on Thursday was attractive to many.
So far, technical analysis shows a mixed view based on the daily timeframe.
On the bullish side, the ability of gold prices to break above previous highs confirms a Fibonacci extension to 2300 points (161.8% of the rebound in the last few days of February), correcting consolidation to 76.4%. The ability to set new highs after a pause is also a bullish signal.
On the bearish side, the weakness after a rise is temporarily significant: the price update of highs wasn't confirmed by the Relative Strength Index. Moreover, this index left the overbought zone (>70) in the first half of last Friday.
Cautious traders might want to wait for a breakout in the 2155-2190 dollar region, as the likelihood of further movement in the direction of the breakout is higher.
In our view, the decline in gold on Thursday and the first half of Friday does not seem like a reversal, as the recent squeeze on the dollar in the last few hours is the result of market speculation that other central banks will be weaker than the Federal Reserve. This provides a supportive environment for risk assets including gold. However, the impressive rise in gold prices since late February, coupled with recent surges, suggest the market might be overheated and in need of a pause.
