Gold price near record, overbought RSI calls for caution for bulls

• The gold price is supported by favorable Fed expectations and geopolitical tensions.
• The upbeat market mood doesn’t do much to affect the strong underlying bullish tone.
• Traders await Fed officials’ speeches and US PCE data for fresh impetus.

The price of gold (XAU/USD) rose to the $2,664-$2,665 region on Tuesday, hitting another record high amid growing bets for more aggressive policy easing by the Federal Reserve (Fed) and geopolitical tensions in the Middle East . Meanwhile, dovish Fed expectations coupled with disappointing US macro data on Tuesday are keeping the US dollar (USD) depressed near YTD lows set last week. This, to a greater extent, overshadows the latest optimism driven by China’s new stimulus measures and acts as a tailwind for the unyielding yellow metal.

Bulls, however, are taking a lull during the Asian session on Wednesday amid slightly overbought conditions on the daily chart. Moreover, investors appear reluctant to place aggressive bets as several Fed officials are scheduled to speak this week, including Fed Chairman Jerome Powell on Thursday. Also this week, the focus will be on the release of the US Personal Consumption Expenditure (PCE) price index on Friday, which could influence expectations of the Fed’s rate cut path and determine the next step in a directional move for the price of gold.

Daily Digest Market Movers: Gold price holds near all-time high amid bets for another 50bps Fed rate cut

• According to CME Group’s FedWatch tool, markets are currently pricing in a more than 75% chance that the Federal Reserve will cut interest rates by another 50 basis points in November.
• Adding to this, weaker US macro data on Tuesday weighed heavily on the US dollar and dragged it back closer to YTD lows, lifting the underperforming gold price to a new all-time high.
• The Conference Board (CB) Consumer Confidence Index deteriorated in September to 98.7 from 105.6 in August, while the Current Situation Index fell to 124.3 from 134.6.
• A survey from the Richmond Fed indicated that manufacturing activity remained sluggish and the composite manufacturing index fell to -21 in September from -19 previously.
• Israeli airstrikes in southern and eastern Lebanon on Monday, which killed more than 500 people, raised the risk of a wider war in the Middle East and further boosted the XAU/USD haven.
• The latest optimism led by China’s new stimulus measures continues to support upside risk, although it doesn’t do much to dent the strong bullish sentiment surrounding the precious metal.
• Speeches by Fed officials this week, including Fed Chairman Jerome Powell on Thursday, will be scrutinized for clues on the path to rate cuts and provide fresh impetus to commodities.
• The focus, meanwhile, will remain on the release of the US Personal Consumption Expenditure (PCE) price index on Friday, which will boost USD demand in the short term.

Technical Outlook: The price of gold needs to consolidate before the next stage, the acceleration of the ascending channel in play

Technically, this week’s breakout through a short-term ascending channel and subsequent rally support the outlook for further gains. That said, the Relative Strength Index (RSI) on the daily chart has crossed the 70 mark, suggesting slightly overbought conditions. This, in turn, makes it prudent to wait for a short-term consolidation or modest pullback before placing new bullish bets around the gold price.

Meanwhile, any corrective slide is more likely to attract some buying discount and find decent support near the breakout of the ascending channel resistance around the $2,625 region. This is followed by the $2,600 round figure which, if decisively broken, could trigger some technical selling and drag the gold price towards the $2,575 region en route to the $2,560 area and resistance turned support at 2,535-2,530 USD.