Gold (XAU/USD) is showing signs of a short-term recovery after a sharp decline, with bullish signals emerging across multiple indicators. As global investors reassess the US dollar’s trajectory and risk sentiment stabilises, gold appears poised for a potential bounce.

Fundamental Analysis

Despite broader macro pressures, gold remains supported by underlying demand for safe-haven assets. The recent dip was largely driven by US dollar strength following hawkish FOMC commentary and better-than-expected data releases. However, as markets begin to price in the possibility of a pause in rate hikes, appetite for gold is re-emerging, which could impact the XAU/USD price. Additionally, persistent geopolitical risks and equity market volatility continue to underpin demand for gold among institutional investors seeking defensive exposure.

Technical Analysis

The 1-hour chart reveals early signs of bullish reversal. After bottoming near 3,288, XAU/USD has started to recover, showing higher lows and bullish price action.

Ichimoku Cloud
Gold is currently trading below the Ichimoku cloud, maintaining a bearish structure overall. However, it is testing Leading Span A at 3,307. A breakout above this level would indicate bullish intent. The Kumo ahead remains thick and red, with Leading Span B at 3,325.50 — a significant resistance level for the XAU/USD pair.

The Tenkan-Sen at 3,296.60 has been reclaimed, while the Kijun-Sen at 3,317.50 is the next key resistance. A break above the cloud would confirm trend reversal potential.

The Chikou Span is still below price and the Kumo, but it’s approaching the candles — suggesting momentum could flip bullish if price breaks higher.

Candlestick and Price Action
The price action reflects a bullish engulfing candle formation followed by a sustained series of higher lows. The recent push to test 3,307 suggests mounting bullish interest in XAU/USD, especially given the rise in volume.

RSI
RSI is climbing from oversold territory and currently stands at 44.47. The crossover above its signal line adds weight to the bullish momentum.

MACD
MACD has crossed above its signal line, and the histogram has flipped positive, indicating that bullish momentum is building on the XAU/USD pair.

Volume
A notable volume spike occurred during the initial bounce, indicating real buying interest. Volume confirmation adds credibility to the emerging reversal.

Buy Trade Setup

Direction: Long (Buy)
Entry: 3,307 USD
Stop Loss: 3,290 USD
Take Profit 1: 3,325.50 USD
Take Profit 2: 3,339 USD

Risk (USD):
3,307 − 3,290 = 17 USD

Reward (TP1 in USD):
3,325.50 − 3,307 = 18.50 USD
Risk-Reward Ratio (TP1): 18.50 / 17 = 1.09:1

Reward (TP2 in USD):
3,339 − 3,307 = 32 USD
Risk-Reward Ratio (TP2): 32 / 17 = 1.88:1

This setup offers a much more favourable risk-reward structure, particularly if price can break through the Kumo. The 3,290 level serves as strong downside protection, while upside targets remain well within technical reach for XAU/USD.

Sentiment Analysis

COT data shows a mild uptick in speculative long positions in gold, while commercial traders have reduced short exposure. ETF flows have stabilised after recent outflows, suggesting the market is entering a new accumulation phase. Retail traders remain net short XAU/USD, which historically supports further upside based on contrarian signals. Overall sentiment is neutralising, with the potential to turn bullish if technical levels break convincingly.

Conclusion

XAU/USD is presenting a compelling short-term long opportunity. The alignment of RSI, MACD, volume, and Ichimoku signals indicate early bullish momentum. With a clearly defined stop and two attractive upside targets, this setup offers strong reward potential relative to risk, especially for intraday or short swing traders.

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