Gold price pulls back from record high ahead of US PCE Price Index, bullish bias remains

Gold price (XAU/USD) attracts some sellers on the last day of the week and retreats further from the all-time peak, around the $2,685-2,686 region touched on Thursday. The downtick is sponsored by the emergence of some US Dollar (USD) buying, which tends to undermine demand for the commodity. Apart from this, the upbeat market mood, bolstered by China's new stimulus measures, turns out to be another factor driving flows away from the safe-haven precious metal. 

That said, expectations for a more aggressive policy easing by the Federal Reserve (Fed) keep the USD confined in a familiar range held over the past two weeks or so and within the striking distance of the YTD low set last week. This, along with the risk of a further escalation of geopolitical tensions in the Middle East, should limit losses for the Gold price. Traders might also prefer to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index. 

Daily Digest Market Movers: Gold price drifts lower amid some USD buying,  Fed rate cut bets to limit losses

• Federal Reserve Governor Michelle Bowman again defended her decision to vote against the oversized rate cut in September and said that the upside risk to inflation is still prominent.
• Earlier this week, Atlanta Fed President Raphael Bostic warned that the central bank needn't go on a mad dash to lower rates, while other Fed officials left the door open for large rate cuts. 
• Fed Governor Lisa Cook said on Thursday that she endorsed the 50 basis points rate cut last week as upside risks to inflation have diminished and increasing downside risks to employment.
• According to the CME Group's FedWatch Tool, market participants see over a 50% chance that the Fed will lower borrowing costs by 50 basis points at the November policy meeting. 
• Data released by the Bureau of Economic Analysis (BEA) on Thursday showed that the US economy grew at a 3% annual rate in the second quarter, matching the original estimates.
• Separately, the US Census Bureau reported that new orders for manufactured durable goods stagnated in August, while orders excluding transportation items rose 0.5% last month. 
• Adding to this, the US Labor Department said that initial claims for state unemployment benefits dropped to 218,000 for the week ended September 21 – marking the lowest since mid-May.
• The data did provide some intraday respite to the US Dollar bulls, though the initial market reaction turned out to be short-lived in the wake of dovish Fed expectations. 
• Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East and a broader regional conflict lifts the safe-haven Gold price to a fresh record high. 
• Meanwhile, interest rate cut is expected to boost global economic activity, which, along with stimulus measures from China, fuels the risk-on rally and caps the XAU/USD.
• The People's Bank of China (PBOC) cut the seven-day repo rate to 1.5% from 1.7% and lowered the amount of the Reserve Requirement Ratio (RRR) by 50 bps on Friday.
• Friday's release of the US Personal Consumption Expenditure Price Index might provide some impetus to the metal, which remains on track to register a third straight week of gains. 

Technical Outlook: Gold price corrective pullback seems limited, $2,600 mark holds the key for bulls

From a technical perspective, the Relative Strength Index (RSI) on the daily chart has been flashing overbought conditions and holding back bulls from placing fresh bets around the XAU/USD. That said, the recent breakout through a short-term ascending trend channel suggests that the path of least resistance for the Gold price is to the upside. Bulls, however, need to wait for some near-term consolidation or a modest pullback before positioning for an extension of the recent well-established uptrend. 

Meanwhile, any meaningful dip could be seen as a buying opportunity near the channel resistance breakpoint, around the $2,625 region. This, in turn, should help limit the downside for the commodity near the $2,600 mark. The latter should act as a key pivotal point, which if broken decisively should pave the way for some meaningful downside in the near term.