- Gold trades in positive territory during Monday's Asian session.
- Support for the precious metal remains strong, driven by the US Fed rate cut and ongoing geopolitical risks in the Middle East.
- However, renewed demand for the US Dollar could limit further gains in XAU/USD.
The Gold price (XAU/USD) hit a record high on Monday, bolstered by a weaker US Dollar. The Federal Reserve's monetary easing cycle, alongside expectations for deeper rate cuts this year, continues to support the non-interest-bearing gold. Additionally, escalating geopolitical tensions in the Middle East have prompted fresh allocations into safe-haven assets like gold.
Looking ahead, traders are awaiting the flash reading of the US Purchasing Managers Index (PMI) data, due later on Monday. A stronger-than-expected result could boost the USD and apply downward pressure on USD-denominated gold prices.
Daily Digest Market Movers: Gold price remains strong amid global factors
FxPro analysts noted, "Forced liquidation of short positions could drive gold prices to historic highs, despite the US dollar holding steady against major currencies and rising bond yields presenting a challenging environment for gold." Over the weekend, Hezbollah and Israel exchanged heavy fire, with the Lebanese militant group launching missiles deep into northern Israel following intense bombardment, according to CNN.
Philadelphia Fed President Patrick Harker remarked on Friday that the US central bank has successfully navigated a difficult economy in recent years. He emphasized the importance of both "hard" and "soft" data in guiding decisions. Fed Governor Michelle Bowman suggested it was necessary to recalibrate the Fed funds rate but favored a smaller initial move, acknowledging that inflation targets have yet to be met. Meanwhile, Fed Governor Christopher Waller stated that while cutting interest rates by 50 basis points was the correct move, the central bank might pause, depending on incoming data.
Technical Analysis: Gold price holds above $2,600 amid overbought RSI
Gold prices continued to edge higher, maintaining a strong bullish trend on the daily chart. The price remains well-supported above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) stands near 70.50, indicating an overbought condition, which suggests potential consolidation before any further rise in gold prices.
The yellow metal is approaching a major resistance level near the all-time high of $2,625. A decisive break above this threshold could open the path to the psychological level of $2,700.
On the downside, initial support appears at the $2,600 mark. A breach of this level could trigger a pullback towards the previous resistance-turned-support level at $2,560, with the next support area around $2,485, the September 6 low.
