Gold: overbought

Further weakening of the US Dollar, after the Fed's rate cut of reference interest rates by 50 bps, and also new geopolitical tensions in the Middle East, brought the price of gold to new all time highest levels. At Friday's trading session the price of gold reached the level of $2.621, where it is finishing the week. Analysts are noting that this year the price of gold was increased by 26%, up to now, and that it represents its biggest yearly price move since the year 2010. Considering that markets have yet one more quarter to run until the end of this year, it is questionable if the price of gold could break another historical record.

During Fridays’ trading session the RSI reached the level of 71, which is clearly overbought market side. As per technical analysis, this break also indicates a potential for a short term reversal to the downside. Moving averages of 50 and 200 days continue to run as two parallel lines with an uptrend, without any indication that the slowdown might come anytime soon.

Markets will use the week ahead to digest information from the latest FOMC meeting. In this sense some short term reversals might be possible, however, it should not be expected to be the significant ones. Considering that the new ATH is reached, and that RSI clearly shows a potential for a short reversal, the price of gold might use the week ahead to slow down a bit. In this sense, a $2.580 might be shortly tested. However, considering current general trends in both market expectations and geopolitics, the price of gold might reach even new ATHs till the end of this year.