Gold sticks to strong intraday gains near record peak, bulls not ready to give up yet

• Gold price advances to a fresh record peak amid rising bets for a June Fed rate cut.
• The risk-on mood and a modest USD uptick do little to hinder the strong move up.
• The overbought RSI on the daily chart warrants some caution for aggressive bulls.

Gold price (XAU/USD) builds on last week’s strong move up and climbs to a fresh all-time peak, around the $2,265-$2,266 area on Monday in the wake of bets for an imminent shift in the Federal Reserve’s (Fed) policy stance. The US Personal Consumption Expenditures (PCE) Price Index released on Friday indicated that inflation increased moderately in February and reaffirmed bets that the Fed will start cutting interest rates in June. This, in turn, keeps the US Dollar (USD) on the defensive below its highest level since February 16 and turns out to be a key factor benefitting the non-yielding yellow metal. 

Apart from this, persistent geopolitical tensions stemming from the protracted Russia-Ukraine war and the ongoing conflicts in the Middle East lend additional support to the safe-haven Gold price. Even the prevalent risk-on mood, bolstered by the upbeat Chinese manufacturing data, does little to dent the underlying strong bullish sentiment surrounding the XAU/USD. This, in turn, suggests that the path of least resistance for the precious metal is to the upside. That said, overstretched conditions on the daily chart warrant some caution for bulls ahead of the release of the US ISM Manufacturing PMI later today. 

Daily Digest Market Movers: Gold price attracts flows amid bets for June Fed rate cut and geopolitical risks

• The crucial US inflation data released on Friday keeps the door open for a June interest rate cut from the Federal Reserve and continues to drive flows towards the non-yielding Gold price.
• The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in February, and the yearly rate edged up to 2.5% from 2.4%.
• Excluding volatile food and energy prices, the core PCE Price Index – the Fed’s preferred inflation gauge – rose by the 2.8% YoY rate as compared to January’s upwardly revised reading of 2.9%.
• Following the release, Fed Chair Jerome Powell noted that the latest US inflation data is along the lines of what we would like to see, reaffirming bets for an imminent shift in the Fed’s policy stance.
• According to the CME Group’s FedWatch Tool, market participants are now pricing in around a 70% probability that the Fed will begin its rate-cutting cycle at the June monetary policy meeting.
• Russia escalates attacks on Ukraine’s energy and other infrastructure in response to the recent Ukrainian long-range drone strikes on oil industry assets deep inside its territory.
• Hamas says the Israeli military is committing a war crime by establishing so-called kill zones across the Gaza Strip where any approaching Palestinian may be shot and killed.
• The global risk sentiment gets a boost from upbeat Chinese data released on Sunday, showing that business activity in the manufacturing sector expanded for the first time in six months.
• This, along with a modest US Dollar uptick, might cap gains for the safe-haven precious metal as traders now look to the US ISM Manufacturing PMI for short-term impetus.

Technical Analysis: Gold price bulls retain control, might take a breather amid overbought RSI

From a technical perspective, last week’s sustained breakout through the $2,200 mark and a subsequent strength beyond the previous record high, around the $2,223 area, was seen as a fresh trigger for bulls. This, in turn, validates the near-term positive outlook and suggests that the path of least resistance for the Gold price is to the upside. That said, the Relative Strength Index (RSI) on the daily chart is flashing overbought conditions. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move.

Nevertheless, the Gold price seems poised to climb further towards claiming the $2,300 round-figure mark. Meanwhile, any corrective pullback is more likely to attract fresh buyers near the $2,223 region. This should help limit the downside for the XAU/USD near the $2,200 mark, which should now act as a key pivotal point. A convincing break below the latter might prompt some technical selling and pave the way for some meaningful downfall in the near term.