Gold price bulls have the upper hand near all-time high ahead of Fed later this week

Gold price (XAU/USD) retreats a bit from a fresh record high, around the $2,589-2,590 area touched this Monday and trades around the $2,581-2,582 region during the early European session. The intraday pullback could be attributed to some profit-taking amid a generally positive risk tone, which tends to undermine the safe-haven precious metal. Any meaningful downfall, however, seems limited in the wake of expectations for a more aggressive policy easing by the Federal Reserve (Fed).

In fact, the markets started pricing in the possibility of an oversized 50 basis points Fed rate cut move later this week after data released last week provided further evidence that inflation in the US was subsiding. This keeps the US Treasury bond yields and the US Dollar (USD) near the 2024 low, which, in turn, should continue to act as a tailwind for the non-yielding Gold price.  Traders might also refrain from placing aggressive bets ahead of the two-day FOMC policy meeting starting on Tuesday. 

This will be followed by monetary policy updates from the Bank of England (BoE) and the Bank of Japan (BoJ) on Thursday and Friday, respectively, which could infuse some volatility in the markets and provide a fresh impetus to the Gold price. Nevertheless, the fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for the XAU/USD is to the upside. Hence, any meaningful corrective decline might still be seen as a buying opportunity and remain limited. 

Daily Digest Market Movers: Gold price might continue to be underpinned by bets for an oversized Fed rate cut 

• Traders lifted bets for an oversized interest rate cut by the Federal Reserve amid signs that inflation in the US is subsiding, which continues to act as a tailwind for the non-yielding yellow metal.
• According to the CME Group's FedWatch Tool, the current market pricing indicates over a 50% chance that the US central bank will lower borrowing costs by 50 basis points later this week. 
• The expectations were fueled by the softer US Consumer Price Index (CPI) and the Producer Price Index (PPI) reports last week, which provided further evidence of easing inflationary pressures.
• The yield on the benchmark 10-year US government bond languishes near its lowest level since May 2023, while the US Dollar remains within striking distance of the YTD low touched last month. 
• Reports of a second attempted assassination attempt on Republican presidential candidate Donald Trump at his Florida golf club on Sunday further underpin demand for the safe-haven bullion.
• The protracted Russia-Ukraine war, along with rising instability and the risk of a further escalation of tensions in the Middle East, turns out to be another factor lending support to the XAU/USD. 
• Bullish traders, however, seem reluctant to place fresh bets and prefer to wait for the outcome of the highly-anticipated FOMC monetary policy meeting on Wednesday before placing fresh bets. 
• Investors this week will further take cues from the Bank of England and the Bank of Japan policy meetings, which might infuse volatility in the markets and provide some impetus to the metal. 

Technical Outlook: Gold price setup favors bulls, dips could be seen as buying opportunity and remain limited

From a technical perspective, the recent move-up along an ascending channel since June points to a well-established uptrend and supports prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking in the overbought zone, warranting some caution for bullish traders. Hence, any subsequent move up is more likely to confront stiff resistance and remain capped near the top end of the upward-sloping channel, currently pegged near the $2,600 round figure. The said handle should act as a key pivotal point, which if cleared decisively will mark a fresh breakout and pave the way for a further appreciation.

On the flip side, the $2,565-2,564 area now seems to protect the immediate downside ahead of the $2,532-2,530 strong resistance breakpoint. Any further decline is more likely to attract fresh buyers and remain limited near the $2,500 psychological mark. Some follow-through selling below the $2,485 region, however, could make the Gold price vulnerable to accelerate the slide towards the $2,470 horizontal support en route to the $2,464 confluence. The latter comprises the ascending channel support and the 50-day Simple Moving Average (SMA), which if broken decisively might shift the near-term bias in favor of bearish traders.