Article by: ETO Markets

Gold climbed to a record high on the back of dovish Fed policy expectations. The Fed is widely expected to cut interest rates by another 50 basis points in November, which has sapped momentum from the dollar's rally and provided support for non-yielding gold prices. At the same time, escalating geopolitical tensions in the Middle East have increased the demand for safe-haven flows into the gold market. In addition, China's new round of economic stimulus measures also provided additional support for gold. However, the prospect of a pick-up in global economic activity due to increased risk appetite in the market restrained further gains in gold.

Traders' focus now turns to the upcoming release of the US Personal consumption Expenditures (PCE) price index, which will influence the Fed's future rate cut path and give fresh impetus to gold. Despite the modest dollar gains, the market still expects that the possibility of further interest rate cuts by the Federal Reserve will limit the room for dollar appreciation and support higher gold prices.

Technically, the Relative Strength Index (RSI) on the daily chart shows that gold prices are overbought, indicating that a pullback is possible in the near term. However, gold has broken out of the short-term uptrend channel, indicating that its path of least resistance remains upward. As a result, gold prices are likely to move higher after consolidation.

In the current situation, the support level for gold is near $…, an area that can be seen as an opportunity to buy on dips. If gold can hold the key support level at $…, the bulls are expected to push gold even higher. Conversely, a break below $… could trigger some technical selling and bring gold back to the $… area, which in turn could test the $… and $… support levels.