Key Talking Points:
- XAU/USD bounces back from key Fibonacci support
- Short-term momentum has flipped to the upside
FIBONACCI LEVELS ARE KEY FOR CONTINUED RECOVERY
Since reaching a 5-month low on Monday, gold seems to have started a V-shaped recovery as the precious metal is up around 4.5% after bouncing off the 50% Fibonacci level 3 days ago. The current price is hovering around the 38.2% Fibonacci from the 1,451 – 2,075 surge at 1,840, an area that converges with the 200-SMA and therefore could offer resistance going forward.
XAU/USD Daily Chart
This setup hasn’t fully gotten rid of bearish signals and is likely to offer more favorable entry points for sellers along the way, so a push above the 1,850 – 1,860 area will be needed to start considering short-term price reversal. Any further bullish momentum is likely to be met with resistance at the 1,900 mark, followed by the 23.6% Fibonacci at 1.928.
Continued weakness in the US Dollar on the back of renewed stimulus and vaccine hopes will likely be a supportive factor for gold, but, as we saw last week, XAU/USD price is not solely dependent on USD moves or yield behavior, as the commodity seems to have been sticking to technical factors lately. And Fibonacci levels have been of increased importance since the highs seen in August, given that every level since then has been highly relevant as a support/resistance area.
XAU/USD Hourly Chart
Focusing on an hourly chart, moving averages are showing momentum shifting to the upside, supported by a golden cross of the 50-SMA over the 100 and 200-SMA. The 20-hour moving average seems to be showing immediate support so we could see daily pullbacks be halted around the 1,830 area.
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
