The current price of gold (XAU/USD) ended the week higher than it started, rising by +4.3% and testing all-time highs above $2,330/ounce due to speculative buying, geopolitical tensions, and forecasts of lower rates this year.
Unquestionably, the yellow metal is on the rise and has been since late 2022, when it formed a bottom in the $1,614 range. Given that there is virtually no resistance and a clear longer-term uptrend (refer to the weekly and daily charts), a lot of traders and investors will be looking for dip buying opportunities. Regarding support, the weekly and daily charts point to $2,147 as a potential level of support, although achieving this would require a significant decline. On the daily scale, support is at $2,280. Should the yellow metal fall below this level, it is expected to test $2,223 as support.
The shorter-term H1 chart shows that $2,304 is the obvious support level. Should a reversal occur this week, this level might serve as a technical floor. The $2,280 daily support indicated above is shown below.
RSI heavily overbought; correction or reversal?
Based on the weekly chart, the Relative Strength Index (RSI) indicates that the indicator is testing levels not seen since 2020. On the RSI of the daily chart, we are also observing early indications of negative divergence ahead of indicator resistance at 87.21, a level that stretches back to August 2020.
The power of the bulls right now is indisputable, even though the RSI signals shouldn’t be disregarded. Another thing to keep in mind is that in strong trending settings, the RSI can stay overbought for extended periods of time and provide multiple false bearish warnings. As a result, it is unlikely that the current RSI indications will cause a reversal this week; rather, a decline driven mostly by profit-taking will occur, and the move is unlikely to break out from daily support at $2,280.
Dip buyers eye support
Given the foregoing, if there is a fall in the market this week, existing buyers will likely want to join the rally or pyramid their positions. In the event that a correction is noticed, the H1 support at $2,304 will be contacted first, then the daily support at $2,280.