The US$2,720 level has proven to be a critical resistance for gold, with the previous two interactions triggering “significant short-term bearish reversals”, notes Yeap Jun Rong, IG market strategist.

Year to date, the commodities market has seen some standout performance, says Yeap Jun Rong, market strategist at online trading provider IG.

Cocoa prices have surged by 180% till date, while precious metals like gold and silver have gained over 20%, he adds. “The rally in precious metals has been fuelled by persistent geopolitical uncertainties, including conflicts in Eastern Europe, the Middle East and US-China trade relations, which have supported safe haven flows.”

Performance of asset classes, year-to-date

Notably, gold demand has been further supported by central banks — particularly in emerging markets such as China and India — actively diversifying their reserves to reduce reliance on the US dollar.

Silver prices have exhibited a “broader upward trend” since March, characterised by a series of higher highs and higher lows, notes Yeap. However, upward momentum has recently weakened, with the emergence of a minor “head-and-shoulders pattern”. 

This formation places the neckline at the critical US$30 ($40.52) level as a key support line for buyers to defend, says Yeap. “Notably, this level also aligns with a confluence of support from an ascending trendline and the 200-day moving average.”

According to Yeap, a “decisive break” below the US$30 level could open the door to a deeper pullback, potentially targeting US$27.80 as the next support. “Conversely, holding above US$30 would likely reinforce the broader bullish trend, positioning buyers to aim for the next resistance at US$32.55, followed by its decade-high at the US$34.87 level.”

Meanwhile, the US$2,720 level has proven to be a critical resistance for gold prices, with the previous two interactions triggering “significant short-term bearish reversals”, notes Yeap. “A move above this level would serve as a strong bullish confirmation, potentially opening the door for a move above its October high.”

According to Yeap, the broader uptrend remains intact, supported by gold prices trading above the daily Ichimoku Cloud and its 100-day moving average, creating a support confluence near the US$2,610 level. The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction.

However, a break below the US$2,610 level could signal a potential bearish reversal for gold, opening the door for a deeper pullback toward the next support level at the US$2,531 level, says Yeap. 

Charts: IG