• XAU/EUR prints a new year-to-date high at €1,629.29.
  • Inflationary pressures around the globe spurred demand for precious metals as a hedge against it.
  • XAU/EUR: With RSI in overbought levels, gold might correct before resuming the upward trend.

Gold against the EUR (XAU/EUR) is trying to extend its weekly rally for seven consecutive days, trading at €1,627 during the New York session at the time of writing.

Early in the Asian session, the yellow-metal gave back some of its weekly gains, as bears pushed the precious metal towards the 50-simple moving average (SMA) in the 1-hour chart at €1,615, but they failed to gain follow-through, bouncing off towards new year-to-date highs at €1,629.29.

Demand on the precious metals segment has increased value in gold and silver. Since Wednesday, when the US inflation figure toped above 6% for the first time in three decades, investors flew towards gold as a hedge against elevated prices.

“Gold is taking a breather after breaking out, as the post CPI sell-off in bonds continued in the overnight session, with the market back to pricing the first hike in July and 60bp of hikes in 2022. But the breakout in gold has also attracted new buyers as global markets search for inflation-hedges,” per TD analysts note for customers.

Further added, that the breakout has driven “China Smart Money group of funds to add a significant amount of new length in SHFE gold. Considering that Shanghai’s gold net length remains near multi-year lows, a change in sentiment could attract a substantial amount of buying interest from this cohort.”

XAU/EUR Price Forecast: Technical outlook

Daily chart

XAU/EUR uptrend move seems to be fading, as witnessed by Friday’s price action. Furthermore, the Relative Strength Index (RSI) at 75 is slightly flattish in overbought conditions, indicating that the non-yielding metal might consolidate before resuming the trend, towards a test of November 9, 2020, high at €1,652. Further, it is approaching the top-trendline of Andrew Pitchfork’s indicator, around the €1,633 region that could stall the upward move.

In case of a correction lower, November 13, 2020, high at €1,604 would be the first support. A break of the latter would extend the downfall towards 2021 previous high at €1,589.

This article was originally published by Fxstreet.com.Read the original article here.