Gold prices remain elevated near record highs as the key FOMC meeting approaches this week

Gold prices (XAU/USD) remain steady near the all-time high of around $2,580 during the Asian session on Monday, amid relatively thin trading volumes due to holidays in China and Japan. Traders are staying on the sidelines as they await this week's significant central bank events, including the Federal Open Market Committee (FOMC) meeting on Wednesday, followed by the Bank of England (BoE) and the Bank of Japan (BoJ) policy meetings on Thursday and Friday, respectively.

The rise in expectations for a more aggressive Fed policy easing, supported by signs of easing inflation in the United States, keeps US Treasury bond yields near their 2024 lows. This trend continues to put pressure on the US Dollar (USD) and provides support for gold, which is a non-yielding asset. Additionally, ongoing US political uncertainty ahead of the November election and persistent geopolitical risks further bolster demand for gold as a safe-haven asset. However, the overall positive market sentiment may limit the potential for new bullish bets on the precious metal.

Daily Digest Market Movers: Gold Price Supported by Dovish Fed-Induced USD Weakness

• Traders have increased their bets on a substantial interest rate cut by the Federal Reserve, driven by signs of declining inflation in the US. This supports the non-yielding yellow metal.
• The CME Group’s FedWatch Tool shows the market is pricing in over a 50% chance of a 50 basis point cut in borrowing costs later this week.
• Expectations have been bolstered by softer US Consumer Price Index (CPI) and Producer Price Index (PPI) reports from last week, which indicate easing inflationary pressures.
• The yield on the benchmark 10-year US government bond remains near its lowest level since May 2023, and the US Dollar is close to its year-to-date low reached last month.
• Reports of a second attempted assassination of Republican presidential candidate Donald Trump at his Florida golf club on Sunday have further increased demand for safe-haven gold.
• The ongoing Russia-Ukraine conflict, along with rising instability and the risk of escalating tensions in the Middle East, also supports the XAU/USD.
• Despite these factors, bullish traders are cautious and prefer to wait for the outcome of the highly anticipated FOMC monetary policy meeting on Wednesday before making new investments.
• Investors will also be looking at policy meetings from the Bank of England and the Bank of Japan this week, which could inject volatility into the markets and impact gold prices.

Technical Outlook: Gold Price May Pause Near Upper Ascending Channel Boundary Around $2,600

From a technical standpoint, the recent ascent within an ascending channel since June indicates a well-established uptrend, supporting the potential for further gains. However, the Relative Strength Index (RSI) on the daily chart is approaching the overbought zone, suggesting caution for bullish traders. As such, any further upward movement is likely to face significant resistance near the upper boundary of the channel, currently around the $2,600 level. This area will serve as a crucial pivot point; a decisive break above it could signal a breakout and lead to additional appreciation.

Conversely, the $2,565-$2,564 range appears to provide immediate support ahead of the stronger $2,532-$2,530 resistance level. Any further decline is expected to attract new buyers, with the $2,500 psychological mark likely to act as a key support. However, if selling pressure pushes the price below $2,485, gold could see a sharper drop towards the $2,470 horizontal support and the $2,464 confluence, which includes both the ascending channel support and the 50-day Simple Moving Average (SMA). A decisive break below this confluence might shift the near-term bias towards bearish traders.