Gold (XAU/USD) has pulled back slightly from its new record high of $2,590 touched earlier this week, now trading around $2,581-2,582 during the early European session. This retreat is largely attributed to profit-taking amid a generally positive risk sentiment in the market. However, downside momentum for gold remains limited due to growing expectations of aggressive monetary policy easing by the Federal Reserve (Fed). Gold is currently trading near it’s record high.
FED RATE CUT EXPECTATIONS SUPPORT GOLD PRICE
The markets are increasingly factoring in the possibility of an aggressive 50 basis points rate cut by the Fed this week. This follows a series of economic data releases that indicate US inflation is cooling. The prospect of a Fed rate cut is keeping US Treasury yields and the US Dollar near their 2024 lows, which further supports the non-yielding gold price.
Investors are cautiously awaiting the outcome of the two-day FOMC policy meeting, which starts on Tuesday. The decision could set the stage for further movements in gold.
BANK OF ENGLAND AND BANK OF JAPAN MEETINGS TO ADD VOLATILITY
Traders are also keeping an eye on the upcoming policy decisions from the Bank of England (BoE) and the Bank of Japan (BoJ), scheduled for Thursday and Friday. These central bank meetings could stir up volatility in the financial markets and provide fresh momentum for gold prices.
Despite the current pullback, the overall bullish trend for XAU/USD remains intact. Any substantial dips are expected to attract fresh buying interest, offering limited downside risk.
GOLD PRICE UNDERPINNED BY GLOBAL UNCERTAINTY AND POLITICAL TENSIONS
Global factors, including the protracted Russia-Ukraine war and political unrest in the Middle East, continue to fuel demand for gold as a safe-haven asset. Additionally, news of a second attempted assassination on US Republican candidate Donald Trump further supports gold’s bullish outlook.
However, market participants are likely to remain cautious, refraining from aggressive positioning until after the highly anticipated FOMC decision. Investors are also looking to the BoE and BoJ for cues on global monetary policy trends.
TECHNICAL OUTLOOK: BULLISH TREND REMAINS INTACT FOR XAU/USD
From a technical analysis perspective, gold’s recent upward move, forming an ascending channel since June, suggests a strong uptrend. However, the Relative Strength Index (RSI) is nearing overbought territory, prompting some caution among bullish traders.
The key resistance level for gold is pegged at $2,600. A decisive break above this level could trigger further gains. On the downside, the $2,565-2,564 area acts as immediate support, with more substantial support found near $2,532-2,530.
A break below these levels could push gold towards the $2,500 psychological level, with further declines limited by strong technical support near $2,470.
