- Gold gained some follow-through traction for the second consecutive session on Thursday.
- Momentum back above the $1,720 level supports prospects for additional near-term gains.
- Slightly overbought RSI on the 1-hour chart warrants caution for aggressive bullish traders.
Gold edged higher through the early North American session and refreshed daily tops, around the $1,725 region in the last hour. This marked the second straight day of a positive move and was sponsored by a softer tone surrounding the US dollar, which tends to benefit the dollar-denominated commodity.
The yield on the benchmark 10-year US government bond extended this week’s retracement slide from the highest level since January 2020 and slipped below 1.70% on Thursday. This was seen as a key factor that kept the USD bulls on the defensive and acted as a tailwind for the non-yielding yellow metal.
From a technical perspective, the overnight rebound from the $1,677-76 region constitutes the formation of a double-bottom, a bullish reversal pattern on the daily chart. A subsequent move above a previous support breakpoint, around the $1,720 region might have set the stage for additional gains.
The constructive outlook is reinforced by the fact that technical indicators on the daily chart have been recovering from the bearish territory and gaining positive traction on the 4-hour chart. That said, slightly overbought RSI (14) on the 1-hour chart warrants caution for intraday bullish traders.
Hence, any further move up is more likely to confront a stiff resistance near the $1,733-34 region. Some follow-through buying has the potential to lift the XAU/USD further towards testing the $1,744-45 region, which if cleared decisively will be seen as a fresh trigger for bullish traders.
On the flip side, immediate support is pegged near the $1,712-10 region. This is followed by the $1,700 mark, below which the precious metal could slide back to retest the double-bottom support near the $1,677-76 region. Some follow-through selling will negate any near-term bullish bias and pave the way for the resumption of the recent/well-established downward trajectory.
XAU/USD 4-hour chart
Technical levels to watch
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