Gold sticks to gains near record high as Fed rate cut bets keep USD depressed

• Gold gains some follow-through positive traction at the start of a new week.
• Fed rate cut bets keep the USD depressed and benefit the non-yielding metal.
• A positive risk tone might cap the XAU/USD amid overbought conditions.

Gold (XAU/USD) prolongs its recent well-established uptrend witnessed over the past three weeks or so and climbs to a fresh all-time peak, around the $3,617 area during the first half of the European session on Monday. The US Dollar (USD) struggles near its lowest level since July 28, touched in reaction to the weaker US Nonfarm Payrolls (NFP) report released on Friday, amid rising bets for a more aggressive policy easing by the Federal Reserve (Fed). This, in turn, is seen as a key factor that continues to drive flows towards the non-yielding yellow metal at the start of a new week.

Meanwhile, central banks continue to be net buyers of the commodity even in the current price range. This turns out to be another factor acting as a tailwind for the Gold. The XAU/USD bulls, however, could pause for a breather amid extremely overbought conditions on short-term charts. This, along with a generally positive risk tone, might contribute to capping the upside for the precious metal. The market focus now shifts to the release of the latest US inflation figures, due during the latter part of the week, which will influence the USD and provide a fresh impetus to the commodity.

Daily Digest Market Movers: Gold bulls not ready to give up amid supportive fundamental backdrop

• The US Nonfarm Payrolls report released on Friday showed that the economy added just 22,000 jobs in August, missing market expectations by a big margin. Moreover, revisions to earlier prints revealed the economy lost 13K jobs in June, marking the first monthly decline since December 2020 and pointing to deteriorating US labor market conditions.
• Additional details revealed that the US Unemployment Rate edged higher to 4.3% from 4.2% in July, as anticipated, while the Labor Force Participation Rate ticked up to 62.3% from 62.2%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, declined to the 3.7% YoY rate in August from 3.9% in the previous month.
• Traders were quick to react and are now pricing in a small possibility of a jumbo rate cut by the Federal Reserve in September. Moreover, market participants see a greater chance that the US central bank might lower borrowing costs three times by the end of this year, which, in turn, pushed the Gold price to the $3,600 mark, or a fresh all-time high on Friday.
• The US Dollar kicks off the new week on a positive note and recovers a part of the post-NFP slump to over a one-month low. Adding to this, the upbeat market mood acts as a headwind for he safe-haven precious metal at the start of a new week. Traders now look to the release of the latest US inflation figures due later this week for a fresh impetus.

Gold needs to consolidate before the next leg up amid extremely overbought daily RSI

The Relative Strength Index (RSI) is holding well above the 70 mark on the daily chart and points to overbought conditions. This makes it prudent to wait for some near-term consolidation or a modest pullback before the XAU/USD bulls start positioning for an extension of the recent breakout momentum through a multi-week-old trading range.

Any corrective decline, however, is more likely to attract fresh buyers near the $3,545 region. This should help limit the downside near the $3,510-3,500 region. A convincing break below the latter, however, could drag the Gold price to the trading range resistance breakpoint, around the $3,440 region, which should act as a strong near-term base.