Gold sticks to gains near all-time peak, renewed USD buying caps gains

• Gold price prolongs its upward trajectory and touches a fresh record high on Monday.
• Major central banks remain in rate-cut mode and continue to benefit the XAU/USD.
• Middle East tensions and US political uncertainty further underpin the precious metal.

Gold price (XAU/USD) scales higher for the fifth straight day – also marking the seventh day of a positive move in the previous eight – and touches a fresh record high, around the $2,732-2,733 region on the first day of a new week. The easing monetary policy environment and bets for more interest rate cuts by major central banks continue to drive flows towards the non-yielding yellow metal. Apart from this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East and the US political uncertainty offer additional support to the safe-haven commodity. 

Meanwhile, the growing market conviction that the Federal Reserve (Fed) will proceed with modest rate cuts assists the US Dollar (USD) in attracting some dip-buying and stalling its modest pullback from the highest level since early August touched last week. This, along with elevated US Treasury bond yields, acts as a headwind for the Gold price. Traders might also refrain from placing fresh bullish bets around the XAU/USD amid slightly overbought conditions on the daily chart. That said, the fundamental backdrop supports prospects for an extension of the recent well-established uptrend. 

Daily Digest Market Movers: Gold price remains well supported by rate cut expectations

• A combination of supporting factors assists the Gold price to prolong its recent well-established uptrend and touch a fresh all-time peak during the Asian session on Monday.
• Tensions and conflicts in the Middle East show no signs of abating despite the killing of Hamas leader Yahya Sinwar as Israel prepares to respond to Iran’s early-October strike. 
• Israel’s Prime Minister Benjamin Netanyahu said that the attack on his private residence by Iran’s  Lebanese proxy Hezbollah would not deter him from continuing the war.
• The Israeli army launched a series of air strikes across Lebanon and also intensified attacks across Gaza, raising the risk of a full-blown regional war in the Middle East. 
• Recent polls indicate a close contest between Donald Trump and Vice President Kamala Harris, adding a layer of uncertainty and benefiting the safe-haven XAU/USD.
• The European Central Bank last week decided to lower interest rates for the third time this year – marking the first back-to-back rate cut in 13 years – and eyes more cuts. 
• The Federal Reserve is also anticipated to lower borrowing costs further, while weak inflation data from the UK solidified bets for a more aggressive easing by the Bank of England. 
• Investors have fully priced out the possibility of another jumbo interest rate cut by the Fed in November as the incoming macro data continue to point to a resilient US economy. 
• Atlanta Fed President Raphael Bostic said that he is not in a rush to cut rates and see the case for a reduction in the policy rate to somewhere between 3% and 3.5% by the end of next year.
• The yield on the benchmark 10-year US government bond holds above 4% and acts as a tailwind for the USD, albeit does little to hinder the commodity’s positive move.
• Investors continue to cheer the launch of two funding schemes on Friday by the People’s Bank of China aimed at supporting the development of capital markets. 

Technical Outlook: Gold price needs to consolidates recent strong gains before the next leg up

From a technical perspective, last week’s sustained strength and close above the $2,700 mark could be seen as a fresh trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart has moved beyond the 70 mark, flashing slightly overbought conditions. This, in turn, makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of the recent well-established uptrend. 

Meanwhile, the $2,700 round figure now seems to protect the immediate downside, below which the Gold price could accelerate the corrective decline towards the $2,662-2,660 zone. The next relevant support is pegged near the $2,647-2,646 area. A convincing break below the latter might prompt some technical selling and expose the $2,600 mark with some intermediate support near the $2,630 region.