Mon. May 20th, 2024

Technical Analysis: Gold price needs to consolidate before the next leg up amid extremely overbought RSI on the daily chart

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Gold price needs to consolidate before the next leg up amid extremely overbought RSI

From a technical perspective, Friday’s strong move up and acceptance above the $2,300 round-figure mark could be seen as a fresh trigger for bullish traders and support prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is flashing extremely overbought conditions. This, in turn, makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Nevertheless, the setup suggests that the path of least resistance for the Gold price is to the upside, and any corrective decline might still be seen as a buying opportunity.

Meanwhile, the Asian session low, around the $2,305-2,300 area, now seems to protect the immediate downside ahead of Friday’s swing low, around the $2,267-2,265 region. A convincing break below the latter might prompt some technical selling and drag the Gold price to the $2,223-2,222 zone en route to the $2,200 mark. The latter should act as a strong base for the XAU/USD, which, if broken decisively, might shift the near-term bias in favor of bearish traders and pave the way for a further depreciating move.

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