Gold Price Forecast: XAU/USD retreats from record highs, holds above $2,500

XAU/USD Current price: $2,507.75

• The market’s optimism faded in the American session, with the FOMC Minutes around the corner.
• China among the major gold buyers amid speculation the USD will weaken further.
• XAU/USD could extend its corrective decline but is still far from bearish.

Gold kept rallying throughout the first half of Tuesday, hitting an all-time high of $2,531.60 amid persistent US Dollar’s weakness and persistent demand for the safe-haven metal, particularly coming from Asia. Mounting expectations that the Federal Reserve (Fed) will trim interest rates, translating into further USD weakness, is pushing Chinese authorities and individual investors into Gold. The bright metal, however, changed course with Wall Street’s opening, and profit-taking is pushing XAU/USD towards the $2,500 mark.

Meanwhile, the positive tone of equities faded ahead of the European close, and most local indexes closed in the red. US indexes followed the negative lead and trade with modest losses, although not far from record highs. Overall, the sentiment remains upbeat, and the US Dollar is on the back foot despite XAU/USD intraday slump.

The focus on Wednesday will be on the Federal Open Market Committee (FOMC) Minutes. The document, usually released three weeks after the meeting, usually provides additional clues on policymakers’ thinking and upcoming decisions. Still, there’s a good chance the document will fall short of expectations and barely impact the USD, given that policymakers have shifted towards a more dovish tone since then. Market participants are pretty much convinced the Fed will trim rates in September, and the Minutes have no chance to change such belief.

XAU/USD short-term technical outlook  

The daily chart for the XAU/USD pair shows the pair has room to extend its gains, with the recent pullback from record highs seen as corrective. The pair keeps developing well above all its moving averages, which maintain bullish slopes. The Momentum indicator, however, retreated from its recent peak and heads firmly south within positive levels. Finally, the Relative Strength Index (RSI) indicator consolidates around 65. A steeper decline seems unlikely in this scenario.

The 4-hour chart suggests the ongoing retracement is far from confirming additional declines. Technical indicators have retreated sharply but hold well above their midlines. At the same time, moving averages maintain their upward slopes, with the 20 Simple Moving Average (SMA) currently at around $2,492.70 and the 100 SMA aiming higher at around$2,439.60.

Support levels: 2,496.40 2,485.10 2,427.20

Resistance levels: 2,510.00 2,523.50 2,535.00