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Gold (XAU/USD) Technical Forecast: Sudden Surge Places $1900 in Sight

Gold (XAU/USD) Technical Forecast: Sudden Surge Places $1900 in Sight

Richard Snow, Analyst

Gold Tech Analysis:

  • Gold breaks through two crucial levels of resistance as media houses report on skirmish in eastern Ukraine
  • 1900 in sight, RSI running into overbought territory – momentum remains key to continued upside price action
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Gold Spikes Higher on News of Minor Conflict

Gold has been in the spotlight lately and rightly so. In times of geopolitical uncertainty, it has been known to act as a safe haven asset as investors continue to pile into the precious metal.

Earlier this week, gold traded above the 8-month trendline acting as resistance, riding the bullish momentum all the way to the 1872 (50% Fib level) /1877 zone of resistance before heading back down, to close briefly below the trendline. Instead of a false breakout, the move was, in fact, a sign of bullish intent that simply required an additional catalyst in order to advance higher.

This morning’s news of a possible skirmish in the east of Ukraine seemed to provide the very catalyst required as gold surged to around 1893. Since then, price action has eased slightly and could look to 1877/1872 as a potential springboard for another go at the psychologically important 1900 level

Gold Daily Chart

Gold (XAU/USD) Technical Forecast: Sudden Surge Places $1900 in Sight

Source: IG, prepared by Richard Snow

Despite gold rising and falling, largely due to news flow, risks remain skewed to the upside but heightened volatility helps to underscore the importance of risk management when trading such volatile markets. Up until today, no conflict had actually taken place but tensions remained high due to the deployment of more than one thousand Russian troops to the Ukraine border.

Could today’s reports of ‘firing’ from Russian-backed, separatist-held eastern Ukraine prove to be the spark that further ignites tensions in the region resulting in higher gold prices?

Gold’s Long Term Outlook

The weekly chart helps to show the recent move in context of historical price action. Apart from 10900, 1916 emerges as a secondary level of resistance.

Gold Weekly Chart

Gold (XAU/USD) Technical Forecast: Sudden Surge Places $1900 in Sight

Source: IG, prepared by Richard Snow

--- Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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