Safe-haven assets caught a strong bidin recent trading, directing Spot Gold to all-time highs of US$3,220/troy ounceversus the US dollar (XAU/USD). The shift towards safe-haven markets was fueledby softer demand for the USD as markets fled dollar assets, as well asescalating trade tensions between the US and China. Unsurprisingly, the Swissfranc (CHF) and Japanese yen (JPY) also attracted substantial bids, with theUSD/CHF pair notching up losses of nearly 4.0% – its largest one-day drop since2015!

Monthly Resistance and Oversold Conditions

Several desks are reportedly eyeingUS$3,500 as the next upside objective for Gold; however, the monthly chartreveals it is considerably overbought according to the Relative Strength Index(RSI). You will note the RSI has remained within overbought territory sincemid-2024 and recently touched gloves with familiar resistance between 87.31 and82.20. This area boasts historical significance from as far back as 2006, andeach time the Index has approached the resistance, a correction/pause typicallyfollowed in the yellow metal. Consequently, it raises the question aboutwhether buying is set to moderate/pause at the monthly resistance area betweenUS$3,264 and US$3,187 (made up of 1.618% and 1.272% Fibonacci projectionratios, respectively).

Daily Demand Zone; Dip-Buying?

Meanwhile, on the daily chart, priceaction came within a stone’s throw of testing support from US$2,942 at thebeginning of the week before rallying to all-time highs noted above. What isinteresting from a technical perspective is that the move left behind a demandarea at US$3,000-US$3,058, which, in my opinion, represents a key technicalzone.

With Gold firmly entrenched in astrong uptrend, dip-buyers could emerge from the daily demand area if acorrection occurs. That said, given technical indicators on the monthly chartsuggesting buyers could pump the brakes, any dip-buying activity would likelybe approached with caution. Confirmation – such as a bullish candlesticksignal or supporting price action on lower time frames – might be requiredbefore pulling the trigger. However, any movement below the mentioned demandarea signals bearish strength from the monthly resistance zone, and potentiallyopens the door to short-term selling opportunities, targeting daily support atUS$2,942, closely followed by support at US$2,865, and possibly US$2,790.

Written by FP Markets Chief Market Analyst Aaron Hill

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