Gold price consolidates below record level as traders await US PCE price index

• The price of gold climbed to a new all-time high on Thursday amid favorable Fed expectations.
• The USD remained near YTD lows and ignored upbeat US data on Thursday.
• Upbeat market sentiment caps XAU/USD ahead of key US PCE price index.

The price of gold (XAU/USD) extended its record run for a fifth straight day on Thursday amid fresh selling of the US dollar (USD). Despite several Federal Reserve (Fed) officials this week trying to play off bets on more aggressive policy easing, markets continue to see higher chances of another excessive rate cut in November. This overshadowed better-than-expected US macro data and weighed heavily on the greenback, benefiting the underperforming yellow metal.

Apart from this, persistent geopolitical tensions stemming from the ongoing conflicts in the Middle East continue to drive refuge flows and are proving to be another factor acting as a tailwind for gold prices. That said, the prevailing risk-on mood in global equity markets – supported by China’s stimulus measures – limits any further gains for XAU/USD. Investors also seem reluctant and prefer to wait on the sidelines ahead of Friday’s release of the US Personal Consumption Expenditure (PCE) price index.

Daily Digest Market Movers: Gold price bulls turn cautious amid risk-on mood ahead of US PCE price index

• Federal Reserve Governor Michelle Bowman again defended her decision to vote against an outsized interest rate cut in September and said the risk of rising inflation still loomed large.
• Earlier this week, Atlanta Fed President Raphael Bostic warned that the central bank must not go on a mad dash to cut interest rates, while other Fed officials left the door open for big rate cuts.
• Fed Governor Lisa Cook said Thursday that she approved a 50 basis point cut in interest rates last week as upside risks to inflation receded and downside risks to employment rose.
• According to CME Group’s FedWatch tool, market participants see a more than 50 percent chance the Fed will cut borrowing costs by 50 basis points at its November policy meeting.
• Data released by the Bureau of Economic Analysis (BEA) on Thursday showed that the US economy grew at an annual rate of 3% in the second quarter, matching initial estimates.
• Separately, the U.S. Census Bureau reported that new orders for durable goods stagnated in August, while orders excluding transportation items rose 0.5 percent last month.
• Additionally, the U.S. Labor Department said initial claims for state jobless benefits fell to 218,000 for the week ended Sept. 21 — marking the lowest since mid-May.
• The data provided some respite during the day for US dollar bulls, although the market’s initial reaction proved short-lived following dovish Fed expectations.
• In addition, the risk of a further escalation of geopolitical tensions in the Middle East and a wider regional conflict is pushing the price of gold to a new record high.
• Meanwhile, the interest rate cut is expected to boost global economic activity, which, along with China’s stimulus measures, is fueling risk-on growth and capping XAU/USD.
• The People’s Bank of China (PBOC) cut the seven-day repo rate to 1.5% from 1.7% and cut the reserve requirement ratio (RRR) by 50 bps on Friday.
• Friday’s release of the US consumer spending price index could provide a boost to the metal, which remains on track for a third straight week of gains.

Technical outlook: Gold price consolidates ahead of next leg up, dip to $2,625 could be bought

From a technical perspective, the Relative Strength Index (RSI) on the daily chart highlighted overbought conditions and prevented bulls from placing new bets around XAU/USD. That said, the recent breakout through a short-term uptrend channel suggests that the path of least resistance for gold prices is up. However, bulls must wait for a short-term consolidation or a modest pullback before positioning for an extension of the recently well-established uptrend.

Meanwhile, any significant decline could be seen as a buying opportunity near the channel resistance around the $2,625 region. This, in turn, should help limit downside for commodities near the $2,600 mark. The latter should act as a key pivotal point, which, if decisively broken, should pave the way for significant short-term downside.