XAU/USD is consolidating weekly gains towards $2,600 and above

• The price of gold is consolidating below record highs at $2,600 on Friday morning, as Fedsepak expected.
• As traders digest the Fed’s big interest rate cut, the US dollar is licking its wounds with Treasury yields.
• Gold buyers remain hopeful amid upbeat daily RSI as the $2,600 resistance appears to be in danger.

The price of gold looked to build on the previous day’s rebound early Friday, consolidating weekly gains amid overnight weakness in the US dollar (USD) alongside US Treasury bond yields. Traders are now awaiting speeches by US Federal Reserve (Fed) monetary policymakers for further clues on the central bank’s interest rate moves.

Gold price takes a break, Fedspeak eyes

The USD snapped its recent slide as markets turn risk-averse and fend off a rally on Wall Street after the People’s Bank of China (PBOC) disappointed by leaving its mortgage interest rate unchanged. Markets had expected China’s central bank to cut prime lending rates (LPRs) amid growing concerns of a slowing economy.

A stabilization in the US dollar appears to be warning gold buyers, but the downside remains cushioned amid increased safe-haven demand for traditional safe-haven assets on China worries. They also remain cautious and refrain from placing new bets in anticipation of policy announcements from the Bank of Japan (BoJ).

While the BoJ is expected to leave interest rates unchanged, any surprise could trigger US dollar volatility led by the USD/JPY pair, ultimately influencing the price of USD-denominated gold.

That said, the price of gold could witness a brief correction if traders resort to profit-taking due to the recent rally and ahead of next week’s US macro data and Fed Chair Jerome Powell’s appearance.

On Thursday, the shiny metal made a solid return to the all-time high of $2,600, but fell slightly below it amid the two-way swings seen in the US dollar as traders digested the dovish Fed outlook amid rebounding risk appetite and mixed data on US jobless claims and existing home sales data.

Gold Price Technical Analysis: Daily Chart

As seen on the daily chart, the gold price outlook looks constructive in the near term as long as the crucial support at $2,532 is defended.

This level is the confluence of the August 20 high and the 21-day simple moving average (SMA).

The 14-day Relative Strength Index (RSI) has turned flat, holding firmly above the 50 level, currently near 66.50, adding credence to bullish potential.

The record high of $2,600 will be challenged if the gold price regains upward traction. Acceptance above this level will require a test of the $2,650 psychological barrier.

On the downside, gold sellers need to break the $2,550 demand area for the correction to extend to the aforementioned key support at $2,532.

A sustained break below this level will likely extend the decline to the uptrend support at $2,512.