Gold gained strong traction for the second straight day

: George Solotarov; 17 February 2022; Hits: 484

Gold gained strong traction for the second straight day

Gold built on the previous day's positive move and gained strong follow-through traction for the second successive day on Thursday. The momentum extended through the European session and pushed spot prices to the $1,890 area, or the highest level since June 2021. A flood of contradicting headlines amid intensifying Russia-Ukraine conflict continued weighing on investors' sentiment, which was evident from a generally weaker tone around the equity markets. This, in turn, was seen as a key factor that underpinned the safe-haven XAU/USD. The risk-off impulse, along with less hawkish FOMC minutes, showing that policymakers are not set on a particular pace of interest rate hikes, led to a sharp pullback in the US Treasury bond yields.

This provided an additional boost to the non-yielding gold. The upward trajectory took along some short-term trading stops placed near the $1,877-$1,879 region. Hence, the latest leg up could further be attributed to some technical buying, which might have already set the stage for a move towards reclaiming the $1,900 mark.

From a technical perspective, the emergence of dip-buying on Wednesday and the subsequent strong move up favor bullish trades. That said, RSI (14) on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution before positioning for any further appreciating move. Hence, momentum beyond the $1,900 mark is more likely to confront stiff resistance and remain capped near the $1,908-$1,910 region. This should act as a key pivotal point, which if cleared will set the stage for an extension of the upward trajectory. On the flip side, the $1,879-$1,877 region now seems to protect the immediate downside ahead of the $1,870-$1,868 support zone. Any further decline would still be seen as a buying opportunity near an eight-month-old descending trend-line resistance breakpoint, around the $1,856-$1,855 zone. The latter should act as a strong base for gold, which if broken decisively might prompt some long-unwinding trade. The XAU/USD could then accelerate the corrective slide towards testing the next relevant support near the $1,832-$1,830 region.