Gold steady below record high as Fed rate cut looms, $3,658 is key

Gold is trading sideways with temporary bullish bias supported by price stability above local demand zone $3625 while gains seemingly capped at overhead resistance $3658 as markets remain cautious ahead of upcoming rate decision by Fed as well as Dollar Index remains under pressure below 98.50 which is a crucial resistance.

Fundamental drivers

• Macro factors support Bullish momentum. Gold sits close to record high.
• Dollar Index weakness continues as 98.50 turns into critical resistance.
• Geo political situation remains fragile amidst mid east temperatures.
• Central banks continue Gold purchase as also ETF flow at record high.
• Markets expect 25 BPS rate cut by Federal Reserve on 17th September meeting.
• Weaker job creations, rising unemployment claims and sticky inflation signalling policy easing by Fed.

Technical drivers

Gold has made strong and decisive bullish breakout above falling wedge resistance line at $3635 which has been attracting buyers on retest of the zone as prevailing uptrend is expected to retest record high $3675 and strong break above this mark may extend potential upside targets to $3685-$3695.

If Gold shows enough buying intervention on dovish tone by Fed, bullish continuation may reach next leg higher $3705 followed by $3725-$3735.

Immediate support sits at $3635-$3625 which acts as active demand zone and also an important support which if fails to hold on strong selling below the zone, the retracement may expose lower levels at 1 Hourly 200 SMA $3606 followed closely by 4 hourly 50 EMA $3603 below which next downside may be witnessed moving towards $3595-$3585.

RSI on Daily time frame reads 77 which is nearly overbought with still enough room for further price advance while 4 hourly RSI reading at 57 is well above the neutrality of 50 indicating strength of bulls.

Though there is healthy room for bullish continuation, record highs are prone to price correction as big impact news like rate cuts are substantially priced in already and there is strong liquidity present at major support zones to attract sellers on heights at the drop of a hat while buyers will be quick to resurface on value areas for bargain hunting on dips around $3550-$3500.