Market Analysis

The gold price (XAU/USD) rises to a new all-time high on the first day of the new week and maintains its intraday advances into the European session. 

Expectations that the Federal Reserve (Fed) would begin decreasing interest rates in 2024, combined with purchases by the Chinese central bank, have been major drivers of the precious metal's explosive climb over the last two weeks. However, a broadly bullish risk tone, boosted by reducing geopolitical tensions in the Middle East, limits additional gains for the safe-haven commodity amid severely stretched conditions on the daily chart.

Furthermore, the optimistic US Nonfarm Payrolls (NFP) report released on Friday suggested that the Federal Reserve (Fed) may postpone interest rate cuts, causing investors to reduce their forecasts for three rate cuts in 2024 to two. Meanwhile, the outlook remains supportive of elevated US Treasury bond rates, which boost the US Dollar (USD) and help to contain advances in the non-yielding Gold price. 

Traders may also wait for the release of US consumer inflation data and FOMC minutes on Wednesday for clues regarding the Fed's rate-cutting course before making new directional bets. 

Technical Analysis: Gold price bulls turn wary with an overbought RSI on the daily chart; downside appears restricted.

From a technical standpoint, Friday's robust surge up and acceptance above the $2,300 round-figure level might be interpreted as a new trigger for bullish traders, bolstering expectations for further increases. However, the Relative Strength Index (RSI) on the daily chart is indicating very overbought conditions. 

As a result, it is wise to wait for some near-term consolidation or a minor retreat before proceeding with the next leg up. Nonetheless, the setting indicates that the path of least resistance for the gold price is to the higher, and any corrective dip could be viewed as a buying opportunity.

Meanwhile, the Asian session low, around $2,305-2,300, appears to have protected the immediate downside ahead of Friday's swing low, around $2,267-2,265. 

A convincing break below the latter might trigger some technical selling, dragging the gold price to the $2,223-2,222 range on its way to the $2,200 barrier. The latter should serve as a solid foundation for the XAU/USD, and if broken forcefully, it might tilt the near-term bias in favor of bearish traders, paving the way for further depreciation.

Paraphrasing text from "FX Street" all rights reserved by the original author.