Gold prices have risen over the past couple of months despite the Federal Reserve's steady increase in interest rates. While a quarter-point rate hike is widely expected this week, weaker-than-expected non-farm payrolls led to speculation that there would be fewer rate hikes next year than anticipated. Lower interest rates are positive for gold since they reduce the attractiveness of competing fixed-income assets.

The recent stock market volatility and elevated geopolitical risk have also contributed to the bull case for gold. Most recently, disagreements over border wall funding could shut down the government, and the trade war with China is still pending a permanent resolution. These risks tend to be a positive for gold prices since the commodity is commonly used as a hedge against risk in investor portfolios.

Technical chart showing the performance of the SPDR Gold Shares (GLD)
StockCharts.com

From a technical standpoint, the SPDR Gold Shares (GLD) broke above R1 resistance at $117.27 to retest reaction highs at around $118.25. The relative strength index (RSI) is elevated at 62.2 but remains below overbought levels of 70.0. The moving average convergence divergence (MACD) also continues to trend upwards, although it could see a near-term bearish crossover. The rising wedge pattern points to an upcoming decision point that could lead to a strong move higher or lower.

Traders should watch for a breakout from upper trendline, 200-day moving average and R2 resistance at around $119.00 over the coming sessions. A move above these levels could lead to a retest of July's highs of around $120.00 or June's highs of around $124.00. If the fund fails to break out from these levels, traders should look for support at trendline and R1 support levels of $117.27. A breakdown from those levels could lead to a move to retest reaction lows and S1 support at $113.62.

The author holds no position in the stock(s) mentioned except through passively managed index funds.