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Gold price is just one step away from a record high! But beware of the risk of overbought correction
Gold prices continued to rise under the influence of Trump's remarks and policies, hitting a recent high of $ 2,778. Trump's call for interest rate cuts and intensified protectionist policies have driven funds to flow into gold for safe havens. Technical indicators show that short-term support is at $2,760-2,758 and resistance is at $2,790. The gold market is still bullish, but we need to be wary of the risk of technical overbought pullbacks.
Fundamental analysis
Gold prices are currently maintaining a bullish momentum and hit a multi-month high of about $2,778 in the past hour before the European market opened on Friday (January 24). U.S. President Donald Trump's remarks eased trade concerns and inflationary pressures; they also triggered a further decline in U.S. Treasury yields, and Trump's call for lower interest rates caused the U.S. dollar (USD) to fall to its lowest point in a month, thereby boosting demand for gold.
Trump's protectionist policies have also heightened market concerns about potential economic consequences, which has become another factor driving funds to safe-haven assets such as gold. Gold remains on the rise and is expected to see a fourth consecutive week of gains. At this time, the market's focus turns to the upcoming global manufacturing purchasing managers' index (PMI) data to look for short-term trading opportunities.
Trump's remarks and the potential impact of protectionist policies on the economy have led to a rise in market risk aversion, further driving funds to the gold market to hedge against possible economic uncertainties and financial market volatility. In addition, Trump's strong call for lower interest rates has also led to lower U.S. Treasury yields, which has weakened the attractiveness of the dollar, thereby boosting gold prices.
Technical analyst interpretation:
From a technical perspective, gold prices saw a clear wave of pullback buying on Thursday and then broke through the $2720-2725 area, indicating that the bullish breakout in the gold market has been confirmed. The relative strength index (RSI) on the daily chart is close to entering the overbought zone, indicating that the market may see a short-term correction. Therefore, considering the possible overbought conditions in the gold market in the short term, bulls may be waiting for some opportunities to enter the market after some consolidation or a moderate pullback.
Nevertheless, the long-term bullish tone of gold remains unchanged, and gold prices are likely to continue to rise in the coming weeks. It is worth noting that the current upward trend of gold prices may encounter strong technical resistance when approaching the historical high of $2790 area, which may inhibit further upside space for gold.
The short-term support level of gold prices is in the $2760-2758 area. If gold falls below this support level, it may retest the previous day's low, which is the $2736-2735 area. If the gold price falls further, the price will approach the key support level of $2725-2720. The support of this area is very important. Once it is effectively broken, it may change the bullish sentiment of the market and even push the gold price to a larger correction.
In addition, if the gold price breaks through the historical high of $2790, it may further test the psychological barrier of $2800. However, technically, we also need to be vigilant about possible corrections in the short term, because the market's RSI is close to the overbought zone, which means that the current price may have been pushed higher.
Summarize
The gold market is currently in a bull market, with both fundamental and technical factors supporting the continued rise of gold. Trump's remarks and policies have exacerbated the market's risk aversion, further driving capital inflows into the gold market. Despite the strong bullish sentiment in the market, gold prices are also close to the overbought zone and may encounter certain technical resistance in the short term. In the coming days and weeks, the market will focus on the release of global manufacturing PMI data and technical support and resistance levels.
From a short-term technical perspective, gold prices may encounter strong resistance when approaching the historical high of $2,790, while the support in the $2,760-2,758 area is the key to the downward price.
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