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  • Gold gained positive traction for the second straight session on Tuesday.
  • Slightly overbought RSI warrants caution before placing fresh bullish bets.
  • Any pullback might be seen as a buying opportunity and remain limited.

Gold built on the overnight bullish breakout momentum through a descending trend-line resistance and shot to near two-month tops, around the $1952 region on Tuesday.

The momentum remained well supported by the prevalent bearish sentiment surrounding the US dollar, which tends to benefit the dollar-denominated commodity. Apart from this, nervousness ahead of the US Senate runoff elections in Georgia and worries about surging COVID-19 cases further underpinned demand for the safe-haven XAU/USD.

Meanwhile, RSI on hourly/daily charts is already flashing slightly overbought conditions and warrants caution for bullish traders. Hence, any subsequent move up is likely to confront a stiff resistance near the $1960-65 congestion zone. The mentioned barrier coincides with the 61.8% Fibonacci level of the $2075-$1764 downfall.

This makes it prudent to wait for a sustained move beyond the $1960-65 hurdle before positioning for any further appreciating move. The XAU/USD might then accelerate the momentum and aim to reclaim the key $2000 psychological mark for the first time since August 2020.

On the flip side, immediate support is pegged near the $1930 level and is closely followed by the 50% Fibo. level. Any further decline might be seen as a buying opportunity, which, in turn, should help limit the downside near the trend-line resistance breakpoint, now turned support, currently near the $1890-85 region.

The latter also marks an important confluence region, comprising of 38.2% Fibo. level and over one-month-old ascending trend-line. A convincing break below will negate prospects for any further gains and drag the yellow metal further below the $1860 intermediate support. The downward trajectory could get extended to test 23.6% Fibo. level, around the $1840 region.

XAU/USD daily chart

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Technical levels to watch