The price of gold (XAU/USD) experienced a slight retreat after reaching a fresh record high earlier this Thursday, hovering just above the $2,200 round-figure mark during the first half of the European session. This comes as the prevailing risk-on sentiment, reflected in the generally positive tone across equity markets, prompts some profit-taking in the safe-haven precious metal. Additionally, a modest uptick in US Treasury bond yields is exerting further pressure on gold, especially in the wake of slightly overbought conditions observed on short-term charts.
Despite the temporary pullback, the downside for gold remains constrained by the Federal Reserve’s (Fed) projection of three 25 basis points (bps) interest rate cuts expected this year. This projection is anticipated to cap any significant upside in US bond yields, potentially weighing on the US Dollar (USD) and bolstering the appeal of the non-yielding yellow metal. Consequently, any further decline in gold prices may be perceived as a buying opportunity and is expected to remain limited.
Investors are now turning their attention to key economic data releases, including flash PMIs, Initial Jobless Claims, and Existing Home Sales from the US, for potential short-term trading opportunities.
Technical Analysis: Consolidation Likely Amid Overbought RSI, Bullish Outlook Maintained
From a technical standpoint, the recent surge in gold prices confirmed a breakout through a bullish flag chart pattern, affirming a positive outlook for the precious metal. However, the Relative Strength Index (RSI) has climbed back above the 70 mark, signaling an overbought condition. As such, it is advisable for traders to await some near-term consolidation or a modest pullback before considering further bullish positions.
Nevertheless, the broader technical setup supports the continuation of the strong uptrend witnessed over the past month. Any significant corrective decline below the $2,200-2,190 region is likely to attract fresh buying interest, with additional support seen around the $2,160-2,158 horizontal zone. A breach of this level may lead to further downside, with the next relevant support lying near the $2,128-2,127 zone, followed by the psychological $2,100 mark.
