XAU/USD looks at $2,600 as more gains remain pending

• Gold price extends Thursday’s bullish breakout ahead of Friday’s US sentiment data.
• The US dollar remains in the red with Treasury yields on renewed Fed rate cut bets.
• Gold price is reaching a symmetrical triangle target at $2,560 with more upside likely as the RSI remains bullish.

Gold prices are at record highs near $2,570 as buyers consider the next move amid sustained weakness in the US dollar (USD) and US Treasury yields. Traders are now eagerly awaiting preliminary US consumer sentiment data from Michigan for new directives.

Gold price capitalizes on increased bets on Fed jumbo rate cut

The price of gold extended an early rally on Thursday as the tide turned in favor of buyers after the release of the US Producer Price Index (PPI) and jobless claims data, which strengthened bets for an exaggerated interest rate cut by the Reserve US Federal (Fed). ) interest rate cut next week.

The PPI rose 0.2 percent in August, the U.S. Bureau of Labor Statistics (BLS) said Thursday, beating expectations for a 0.1 percent increase. Excluding food and energy, the PPI rose 0.3%, slightly hotter than the consensus estimate of 0.2%. Annually, the headline PPI rose by 1.7%. Excluding food, energy and trade, the annual rate was 3.3%.

Meanwhile, initial jobless claims were 230,000 for the week ended September 7, up 2,000 from the previous period, while in line with the forecast. The gloomy US data, combined with the Wall Street Journal (WSJ) article on the Fed’s rate cut dilemma, brought back bets for a jumbo cut at the September meeting.

The US dollar snapped its recovery mode and fell sharply against dovish Fed expectations, following a sell-off in US Treasury yields.

The USD also bore the brunt of resurgent demand for the euro after the European Central Bank (ECB) cut interest rates on Thursday, but President Christine Lagarde played down expectations for a further cut next month. Hawkish tapering by the ECB sent EUR/USD higher at the expense of the greenback.

These factors added to gold’s rebound, driving the shiny metal to a new lifetime high of $2,560 on Thursday.

In trade so far on Friday, gold prices rose again and renewed record highs at $2,568 as Asian traders hit their desks and reacted to overnight optimism around renewed bets around Fed announcements next week.

However, buyers are holding their breath at the moment as they become a bit cautious ahead of the weekend. Markets could resort to repositioning ahead of next week’s Fed policy meeting, fueling a corrective decline in gold prices. End-of-week flows could also play a key role in gold price action, along with the release of data on US consumer sentiment and inflation expectations.

Gold Price Technical Analysis: Daily Chart

As seen on the daily chart, the price of gold finally had a breakout after Thursday’s close above the upper limit of the three-week-old trading range, set at the previous record high of $2,532.

Meanwhile, the 21-day simple moving average (SMA), now at $2,513, continued to provide strong support to gold buyers.

With the range break in play, the price of gold finally reached the one and a half month old symmetrical triangle target measured at $2,560.

Despite the relentless rally, the 14-day Relative Strength Index (RSI) is still in bullish territory with room for more upside until it crosses the overbought line. The RSI is currently trading near 66.50.

If the gold price extends its bullish momentum, the next upside hurdle is seen at the $2,600 level, above which the psychological $2,650 level will be tested.

Should a correction occur, initial support is seen at the previous record level of $2,532, below which the 21-day SMA at $2,513 will be tested.

A sustained break below the latter is needed to challenge the key $2,500 level.