Not too long ago, we saw XAU/USD break strongly below a bullish trendline on the daily chart. Since then, we've seen some consolidation. Could this have been a fake-out to shake long holders out of their positions?
The last two weeks have been bullish, a stark difference from the first week of May when gold fell well over 800 pips. This is due to seeing the USD taking a breather as it has shown its first signs of weakness this year. If the US dollar continues to fall through the summer, then we might see this as the beginning of another uptrend for gold.
Seasonally, gold likes to rally throughout June and July. However, it's August when it starts to rise and tends to make its yearly highs as we head into the last quarter of the year.
The price has not gone below its yearly low in January, but it is close. If it makes one more attempt to take out that low before getting in sync with what typically happens at the end of the second quarter, it is something to keep an eye on for traders.
We can see some hidden divergence taking place on the weekly chart with a Williams Percent Range indicator marked with the green trend lines. Hidden divergence with an oscillator can indicate a trend continuing.
Between Sept. 27 and Dec. 13, we can see hidden divergence taking place where the Williams Percent Range made a lower low, but the price failed to create a new lower low. What happened right afterward was the price continuing its upward direction and eventually retesting its all-time highs made in August of 2020.
If this correlation follows the same pattern again this time around, we could see another strong move with the most recent hidden divergence.