Gold Technical Analysis: Technical Tuesday – April 15, 2025

• Gold Technical Analysis: Strong momentum vs. overbought conditions - key dilemma
• Monthly XAU/USD chart has not been this overbought since the pandemic
• Gold trading strategy: dip-buying still preferred but caution warranted

 

Gold has had an amazing run, thanks to central bank buying, strong haven demand, weakness in US dollar, inflation hedging and momentum buying, among many other fundamental reasons. While there are no signs to suggest that this strong bullish trend is about to turn, you can’t help but feel that, with trade war concerns easing ever so slightly, haven demand might ease a little. In this edition of Technical Tuesday, I will provide gold technical analysis and look at various time frames to highlight how the metal has become significantly overbought with prices continuing to trade near record highs that have been created repeatedly in recent months. Still, unless we observe a clear reversal pattern, any technical indications of overheating prices should be taken with a pinch of salt.

 

Strong Momentum vs. Overbought Conditions - Key Dilemma for Gold Traders

 

Let’s cut to the chase. While gold remains in a very strong bullish trend, there are growing technical signs that the rally may be overextended, at least in the short term. Several momentum indicators are starting to push very deep into overstretched territory, not least the Relative Strength Index (RSI). But therein lies the dilemma. Gold’s momentum indicators are at extreme overbought levels for a reason: strong buying pressure. Why, then, would you try to pick the top in gold prices, you might be wondering. Well, I am not. Not yet anyway. The whole point of this gold technical analysis article is twofold. First, to highlight the risks of chasing this rally, without first witnessing a pullback in gold prices. Second, to highlight the potential for gold to top out soon, which the bears could take advantage of when confirmed.

 

 

Gold technical Analysis: Key support levels on daily chart

 

On the daily time frame, the RSI touched 70.0 as gold broke to a new record peak of $3,245 on Friday. This is a threshold that traditionally denotes overbought conditions. While this doesn’t necessarily imply an immediate reversal, it’s often a precursor to sideways movement or a short-term pullback. If we do see a short-term pullback, then the first level of support to watch is at $3,167, marking the previous all-time high from early April. A further dip could test the $3,100 level, while the $3,000–$3,022 range marks a critical zone, encompassing both the short-term uptrend line and a psychologically significant level.  Below that, $2,956 stands out as a major pivot. A break beneath could open the door to a deeper retracement toward the long-term support zone around $2,790.

 

 

Monthly XAU/USD chart has not been this overbought since the pandemic

 

What's more telling is the longer-term picture. The monthly RSI has been perched above the overbought zone since April 2024 and is now nudging close to 85.0. Historically, this level has preceded major consolidations or reversals—seen most recently in October 2023 and previously during the peaks in 2011 and the pandemic-era highs. Those events were followed by cooling-off periods in the price of gold ranging from several weeks to several months.

 

 

What about the weekly time frame?

 

Well, the weekly RSI is also raising eyebrows, currently hovering above 75. Again, not necessarily a screaming sell signal, but certainly a flashing yellow light. RSI divergence—where prices make new highs but RSI does not—is another warning signal to be wary of. This is evidenced both on the daily and weekly RSI indicators.

 

 

On this weekly time frame, another metric worth noting is gold’s divergence from its 200-week moving average. Prices are trading around a huge $1,150 above this long-term mean, which in percentage terms is 55% higher. Such a gap is rare and often unsustainable unless supported by powerful macroeconomic drivers—which, to be fair, the current environment does offer. Nonetheless, mean reversion is a powerful force.

 

So, how would you trade gold?

 

A key reversal candle pattern on the daily or weekly chart, plus some downside follow-through, would be the clearest technical signal to watch, which would indicate a reversal in the trend. That said, for now, at least, bullish trend-following traders still have the upper hand. Unless we start seeing lower highs and lower lows, any dip is likely to be viewed as a buying opportunity. But I can’t stress this point enough in this gold technical analysis article: caution is warranted as the rally enters its more mature phase.

 

 

Source for all charts used in this article: TradingView.com

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R