Gold surged Monday, trading near its highest levels since mid-May as XAU/USD extended its bullish momentum into the new week. The precious metal continues attracting safe-haven demand amid ongoing market uncertainty, pushing prices into territory not seen in over two months.
However, technical indicators are flashing warning signs for traders riding the rally. The Relative Strength Index has entered overbought territory, suggesting the current upward trajectory may be overextended and vulnerable to a near-term correction. This divergence between price action and momentum indicators creates a precarious situation for late entrants to long positions.
The move affects gold traders, forex brokers, and portfolio managers using precious metals as hedging instruments. While the bullish trend remains intact on higher timeframes, the overbought conditions could trigger profit-taking and volatility in the sessions ahead.
FXnCO Insight
Traders should exercise caution on fresh long positions at current levels and consider waiting for a pullback to more sustainable technical entry points before adding exposure.
Source: FXStreet