Gold: Bullish technical set up points to the $1830 zone

Monday’s risk-on rally in the US equities, in the wake of the optimism over the coronavirus vaccine and a breakthrough at the European Union (EU) Summit, downed the US dollar and benefited gold (XAU/USD). The yellow metal has turned the $1818.28 resistance into a support and is now testing nine-year highs at $1820.61. Above this level, gold would rally towards the $1830 mark, FXStreet’s Dhwani Mehta briefs.

Key quotes

“Gold prices are set to refresh multi-year highs in the day ahead, as the upbeat market mood will continue to pressure the greenback. Also, growing concerns over the economic risks from the continued rise in the infections globally will also likely bode well for gold. Meanwhile, the risk sentiment will remain the main market driver amid a lack of relevant economic news from the US docket.” 

“The spot has charted a bull pennant breakout following a close above the falling trendline resistance at $1818.28. The break higher prompted the bulls to test the nine-year highs of $1820.61. Acceptance above the latter will trigger a fresh rally towards the pattern target at the $1827/30 zone.”

“The Relative Strength Index (RSI) has turned south from the overbought territory but remains well above the midline, indicating room for additional upside. The price trades above all major Simple Moving Averages (SMA), adding credence to the ongoing bullish bias.”

“The immediate downside is likely to be capped by the resistance now turned support at $1818.28. Powerful support awaits at $1816.28, which is the confluence of the bullish 21-HMA and rising trendline (pattern) support. The bulls will continue to guard that level in the near-term.”