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Gold price stands tall near all-time peak, eyes $2,400 mark amid geopolitical risks

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  • Gold price continues to scale new record highs amid persistent geopolitical tensions.
  • The strong move up seems unaffected by reduced Fed rate cut bets and bullish USD.
  • Extremely overbought conditions might prompt some profit-taking around the metal.

Gold price (XAU/USD) climbs to a fresh all-time high on Friday and maintains its bid tone, just below the $2,400 mark heading into the European session. Investors remain concerned about the risk of a further escalation of geopolitical tensions in the Middle East, which, in turn, is seen as a key factor benefiting the safe-haven precious metal. Apart from this, expectations that major central banks will cut interest rates this year offer additional support to the non-yielding yellow metal and contribute to the positive move. 

The aforementioned supporting factors, to a larger extent, offset the underlying bullish tone surrounding the US Dollar (USD), bolstered by expectations that the Federal Reserve (Fed) may delay cutting interest rates. This, in turn, suggests that the path of least resistance for the Gold price is to the upside and supports prospects for additional gains. That said, extremely overstretched conditions on daily, weekly and monthly charts, along with a stable performance around the equity markets, might cap gains for the XAU/USD. 

Daily Digest Market Movers: Gold price continues to attract haven flows amid persistent geopolitial tensions

  • Heightened tensions in the Middle East, amid a possible Iranian retaliation over a suspected Israeli strike on its embassy in Syria, lift the safe-haven Gold price to a fresh all-time high on Friday.
  • The cooler-than-expected US Producer Price Index released on Thursday keeps alive hopes for an imminent interest rate cut by the Federal Reserve and provides an additional boost to the XAU/USD 
  • According to the CME Group's FedWatch tool, traders see a greater chance that the Fed will not start its rate-cutting cycle before the September policy meeting and fewer than two rate cuts this year. 
  • New York Fed President John Williams noted that inflation setbacks are not a surprise and that the central bank does not need to change policy in the near term, though eventually will need to cut rates.
  • Richmond Fed President Thomas Barkin said that the central bank is not yet where it wants to be on inflation and this week's CPI report did not increase his confidence that disinflation is spreading.
  • The hawkish outlook keeps the US Treasury bond yields elevated, which allows the US Dollar to stand tall near the YTD top, albeit does little to dent the bullish sentiment surrounding the XAU/USD.

Technical Analysis: Gold price bulls might opt to take some profits off the table amid overbought conditions

From a technical perspective, the strong positive momentum remains uninterrupted despite the extremely overbought Relative Strength Index (RSI) on the daily chart. Bulls, however, might opt to take some profits near the $2,400 mark heading into the weekend, warranting some caution before positioning for any further appreciating move. Any meaningful corrective slide below the Asian session low, around the $2,370 area, however, is likely to find decent support near the $2,352-2,350 region. Some follow-through selling could expose the next relevant support near the $2,332 area before the Gold price eventually drops to the $2,300 neighborhood, or the weekly low.

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