Gold Surges to Near All-Time Highs, Tests $2,378 After Breaking Key Resistance

Gold prices surged, breaking above $2,300 and testing $2,378, driven by favorable fundamentals and technicals. The rally has been fueled by rising inflation expectations and a cooling US labor market, with next week's US inflation data critical for the precious metals.

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Gold Surges to Near All-Time Highs, Tests $2,378 After Breaking Key Resistance

Gold Surges to Near All-Time Highs, Tests $2,378 After Breaking Key Resistance

Gold prices have surged in recent weeks, with the precious metal breaking above the key $2,300 resistance level and currently testing $2,378. The rally has been driven by a combination of favorable fundamentals and technicals, suggesting further gains may be in store.

Last week, gold rose 2.5%, snapping a two-week losing streak and reaching a high of $2,371, just shy of the all-time record of $2,431. The daily chart shows support at $2,280, an area buyers could look to defend as they attempt to enter the uptrend. This support level is reinforced by a 1.618% Fibonacci projection ratio at $2,293.

Why this matters: The surge in gold prices has significant implications for the global economy, as it may signal a loss of confidence in fiat currencies and a rise in inflation expectations. As investors seek a hedge against rising prices and falling real yields, gold's rally could have a ripple effect on financial markets and central bank policies.

Gold has rallied beyond the 38.2% Fibonacci retracement at $2,336, ending the week at $2,371, a 61.8% Fibonacci level. The daily Relative Strength Index (RSI) rebounded from the 50.00 centerline and trendline support, signaling a buyers' market. While the weekly RSI pulled back from overbought highs not seen since mid-2020, this indicator can remain overbought for extended periods in trending environments.

The technical structure suggests scope for gold to explore higher levels, with the price entrenched in a clear uptrend. However, a potential correction to $2,350-$2,340 could unfold before the upward trend resumes. Shorter-term structure on the 1-hour timeframe highlights nearby demand at $2,347-$2,355 as a possible platform for buyers this week, with additional support at $2,326 and $2,344 if this level fails to hold.

Fundamentally, gold is being supported by rising inflation expectations and a cooling US labor market. The recent Michigan Consumer Sentiment Report showed consumer confidence falling but inflation expectations increasing, putting the focus on next week's key US inflation report. Meanwhile, US jobless claims jumped to an eight-month high, hinting at a potential slowdown in the robust labor market.

Gold's breakout is also having a positive effect on silver prices. The silver/gold ratio remains in an uptrend, with a series of higher lows and higher highs in place since the start of the year. Silver's daily chart shows a recent break above its 20-day moving average, a bullish signal, with the 50-day and 200-day moving averages forming a golden cross in late March, suggesting a retest of the recent $29.80 high is likely in the coming weeks.

As gold tests new highs and silver continues to follow suit, next week's US inflation data will be critical for the precious metals and broader financial markets. A higher-than-expected inflation reading could supercharge gold's rally as investors seek a hedge against rising prices and falling real yields. However, a cooling of inflation could spark a correction as the US dollar finds support. Regardless of the near-term fluctuations, the bigger picture for gold and silver remains constructive, with a powerful combination of technical and fundamental forces driving prices higher.

Key Takeaways

  • Gold prices surge above $2,300, testing $2,378, driven by favorable fundamentals and technicals.
  • Gold's rally may signal loss of confidence in fiat currencies and rising inflation expectations.
  • Technical structure suggests scope for gold to explore higher levels, with potential correction to $2,350-$2,340.
  • Fundamentals: rising inflation expectations and cooling US labor market support gold's rally.
  • Silver prices also rise, with silver/gold ratio in uptrend, and potential retest of $29.80 high.