Gold prices headed for their best week since 2008, rallying about 8.25% over the course of the past 5 trading days. From a fundamental standpoint, the anti-fiat yellow metal capitalized on a broad pullback in the US Dollar as equities soared. Helping to contribute to this dynamic was a combination of open-ended QE from the Federal Reserve and the US $2 trillion fiscal stimulus package to help combat the coronavirus outbreak.

GOLD BROADER OUTLOOK
Focusing on technical analysis, XAU/USD bounced after prices found support at lows from the latter half of last year. This makes for a barrier between 1445 to 1459 along with what could be a potential rising trend line from May 2019 on the daily chart below. Gold prices then climbed through lows achieved in January and February which make for an inflection point between 1536 to 1550.

The aggressive rise in gold last week – matching gains observed 12 years ago – sent the yellow metal back towards peaks reached earlier this month. That makes for key resistance between 1679 to 1703. Coincidentally, this range includes the 2013 high at 1697. If XAU/USD can manage to clear this barrier and confirm a daily close above it, gold could set course to target peaks last seen in 2012 at 1795. On the way bullion could encounter the 61.8% Fibonacci extension at 1721.

GOLD NEAR TERM PICTURE
Zooming in on the 4-hour chart can help paint a better picture of what could be in store in the near term to help account for elevated volatility. Here I have pointed out that gold’s ascent slowed as prices consolidated between 1594 and 1645. There may be a support line forming from March 19. A third validation point can confirm this rising trend line and if it holds, gold could be guided higher to retest peaks from earlier this month.

Yet I have also noted the presence of negative RSI divergence, a sign of fading upside momentum. This can precede a turn lower, particularly if gold pushes under 1594 and confirms the breakout. If the latter is the case, the yellow metal could set up to test the inflection point between 1536 to 1550 pointed on the daily chart. If this area is cleared, a retest of current March lows could be due.