Gold remains in the green for the fourth day in a row and rose to its highest levels since March 19 in early trading on Tuesday, an extension of Monday’s strong acceleration (gold is up nearly 3.5% for the day, the biggest daily gain since February 6).
Monday’s breakout and close above the $4,600 pivotal resistance area (38.2% Fibo of $5,419/bearish $4,099/100DMA) triggered a strong signal of a continuation of the recovery wave from the $4,099 bottom of the rally on March 23, which paused for one week within the $4,600/$4,305 trading range.
Recent geopolitical developments regarding President Trump’s signals that the war in the Middle East could end within 2-3 weeks have revived risk appetite sending the dollar lower and boosting demand for the yellow metal.
Further actions will depend mainly on the length of the new positive sentiment, as President Trump’s messages have often been short-lived and do not usually allow for stronger positive market developments.
The assumption that the conflict is heading towards its end would maintain or even enhance positive sentiment that would continue to push prices higher.
Immediate resistance lies at $4759 (50% retracement/daily Kijun-sen), followed by $4800 (20DMA low) and $4915/21/35 (61.8% Fibo/55DMA/daily cloud base).
The technical picture on the daily chart has improved (100 DMA breakout/5/10DMA bullish crossover) but still requires more evidence as 14-day northbound momentum is in negative territory, RSI has moved into neutral territory and Stochastic is in overbought territory.
This keeps the scenario of a healthy correction ahead of a larger downside resumption of the lower high at $5,419, especially in case of insufficient support from the fundamental side.
A sustained breakout at $4,759 (50% retracement) would provide further support to the bulls and brighten the near-term outlook.
Caution about returning below the 100DMA ($4,642) would risk a test of the former pivot barrier, now acting as strong support at $4,600, the loss of which would sideline the bulls in the near term.
Accuracy: 4759; 4800; 4841; 4900.
Sup: 4661; 4642; 4600; 4532.
