XAU/USD snaps record rally as focus shifts to Powell’s speech

• The price of gold is holding its range near record highs on Thursday morning, pending Fed Chairman Powell.
• The US dollar is blocking the previous rally with Treasury yields as risk returns.
• Extreme overbought conditions on the daily chart continue to warn gold buyers.

The price of gold is extending its consolidation mode just below the record level reached near $2,670 on Wednesday, as buyers turn cautious ahead of a series of speeches by US Federal Reserve (Fed) policymakers later on Thursday .

Will Powell’s speech trigger a sustained gold price correction?

Among several Fed officials taking the podium, Fed Chairman Jerome Powell’s pre-recorded opening remarks will hold the key to gauging the size of the next rate cut, especially with markets pricing in about a 62 percent chance the Fed will cut rates . by another 50 basis points (bps) in November.

The Fed’s bullish outlook was further supported by recent comments from Fed Governor Adriana Kuglar, who said during her overnight appearance that she “strongly supports” the Fed’s decision to cut interest rates by half a point last week. Kugler added that he would “support further rate cuts going forward.”

The recent Fedspeak, combined with weak consumer confidence from the US Conference Board (CB) and regional activity data, have raised bets for another jumbo rate cut by the Fed at its next policy meeting.

Fed dovishness and China’s stimulus optimism resurfaced early Thursday, checking the earlier recovery in the US dollar (USD) and US Treasury yields while fueling a minor rally in gold prices. The fate of the gold price hinges on the Fed’s upcoming comments as traders refrain from placing further bets amid extremely overbought conditions on the daily chart.

Ahead of Fedspeak, US durable goods orders, final Q2 gross domestic product (GDP) and weekly jobless claims will provide some trade stimulus for gold prices. Risk sentiment will also play a key role as focus shifts to the US Personal Consumption Expenditure (PCE) price index from Friday, following Powell’s remarks.

The price of gold saw a temporary retreat from all-time highs, while the US dollar made an impressive comeback from 14-month lows against its major rivals on market optimism fueled by China’s stimulus. Traders also resorted to profit-taking on USD shorts ahead of Fed Chair Jerome Powell’s key speech.

Gold Price Technical Analysis: Daily Chart

Nothing is changing for the price of gold from a near-term technical perspective as it remains in extremely overbought territory, suggesting that a significant correction could be underway.

The 14-day Relative Strength Index (RSI) is currently flirting with the 76 level.

If buyers regain their lost momentum, acceptance above the record level near $2,670 is essential to unleash further upside towards the $2,700 barrier.

Instead, any correction in the gold price will likely test the September 24 low of $2,623, below which the $2,600 threshold will come into play.

Further south, gold sellers could target the September 20 low of $2,585.