Article by: ETO Markets
Gold prices (XAU/USD) hit a record high this week, largely driven by the start of the Federal Reserve's monetary easing cycle and heightened geopolitical risks in the Middle East. The Federal Reserve's recent 50 basis point rate cut and hints of further cuts to come have undermined demand for the dollar, thus supporting gold, a non-interest-bearing asset. In addition, tensions in the Middle East, especially the conflict between Hezbollah and Israel in Lebanon, further increased market uncertainty, prompting investors to shift funds into safe-haven assets such as gold. However, a rebound in the US dollar could limit gold's upside, especially if the upcoming US Purchasing Managers' Index (PMI) data comes in stronger than expected, which could boost the greenback and weigh on gold prices.
From a technical point of view, gold prices are currently maintaining a strong uptrend and are encountering resistance near the all-time high of $2,650. The 14-day Relative Strength Index (RSI) on the daily chart shows overbought conditions near 70.50, which suggests that some consolidation is likely in the near term. However, if gold is able to break through the $2,625 resistance, it could rise further to the psychological $2,700 level. On the downside, $2,600 is the first key support level, and a break below this level could lead to a pullback to the $2,560 support level, where previous resistance has turned into support. Further declines could test the September 6 low of $2,485.
