Gold prices hover around record levels after reaching the $3,690 level, as increasing hopes of a US Federal Reserve rate cut continue to spur weakness in the US Dollar and shore up the non-yielding metal. Though overbought conditions have driven marginal profit-taking in advance of pivotal central bank announcements this week, such as Fed, BoC, BoE, and BoJ decisions, downside for Gold is still limited. Geopolitical tensions, specifically the situation in Russia-Ukraine and the Middle East, continue to support safe-haven demand, maintaining the overall Gold outlook bullish in the short term.

KEY LOOKOUTS

• Markets overwhelmingly anticipate a 25 bps rate cut, with Powell’s cues for subsequent policy actions to influence Gold’s next path.

• Policy statements from the BoC, BoE, and BoJ towards the end of this week can introduce volatility in Gold prices.

• Overbought RSI readings above 70 indicate modest upside momentum at the $3,700 level, instilling caution for new entries.

• Escalating Russia-Ukraine conflict and Middle East tensions continue to offer safe-haven support to Gold.

Gold continues in a bullish consolidation close to record levels as investors wait for pivotal central bank announcements this week. The Federal Reserve is expected to reduce rates by 25 bps, but the focus lies on Powell’s comments on the speed of future easing, which will have a significant bearing on the US Dollar and the path of Gold. While technicals indicate overbought levels that can constrain near-term gains above the $3,700 level, safe-haven demand fueled by recurring geopolitical tensions still buffers the downside, maintaining a positive tone for the precious metal.

Gold hovers at all-time highs near $3,690 as Fed rate-cut speculation damps the US Dollar. Overbought levels restrain near-term upside, though geopolitical tensions and safe-haven demand remain supportive of the bullish trend.

• Gold approached a new record high at around $3,690 in the Asian session on Tuesday.

• Expectations of a Fed rate cut continue to weigh on the US Dollar, supporting Gold’s allure.

• Markets expect a 25 bps reduction with an eye on Powell’s hint on additional easing ahead.

• Overbought RSI values greater than 70 indicate slim room for near-term upside profits.

• Decision from major central banks from BoC, BoE, and BoJ this week could contribute to volatility.

• Geopolitical tensions such as the Russia-Ukraine fighting and Middle East unrest offer safe-haven support.

• Firm support levels appear at $3,645 and $3,610, while $3,700 is the major resistance barrier.

Gold is trading close to record highs as investors continue to be interested in the Federal Reserve’s next policy decision. As markets are mostly pricing in a 25 bps cut, all eyes now turn towards the Fed’s revised economic projections and Powell’s comments, which will likely influence expectations for the pace of easing over the next few months. The dovish bias has been putting significant downward pressure on the US Dollar, lifting demand for the non-yielding precious metal.

XAU/USD DAILY CHART PRICE

SOURCE: TradingView

Apart from the Fed, investors are keeping a close eye on other central bank announcements this week, such as decisions by the Bank of Canada, Bank of England, and Bank of Japan. In addition, increased geopolitical tensions—covering the Russia-Ukraine conflict to renewed Middle East upheaval—are creating further safe-haven demand for Gold. This mix of supportive fundamentals and geopolitical tensions continues to have investor sentiment firmly bullish.

TECHNICAL ANALYSIS

Gold’s recent breakout above a bullish flag pattern is an indicator of strong upside momentum, though the daily RSI remaining above 70 is an indicator of overbought conditions and caution is needed. The $3,700 level has now emerged as a critical psychological resistance, while near-term support is in the form of $3,645, followed by $3,610. A break and hold above $3,700 could lead to further increases, but a break below $3,600 could see a more severe corrective move towards the $3,500 area.

FORECAST

In the event that the Fed reaffirms a dovish policy and hints at several rate cuts in the near future, Gold can penetrate the $3,700 psychological level and continue its rally. Ongoing weakness in the US Dollar, combined with geopolitical tensions-driven safe-haven demand, may drive more upside momentum and maintain buyers firmly in charge.

Conversely, if the Fed provides a dovish outlook or cues a slower pace of easing, Gold can come under profit-taking pressure. A retreat below $3,645 can put the $3,610–$3,600 zone in jeopardy, and a further fall can even put the $3,500 level in the spotlight, particularly if risk appetite picks up in overseas markets.