Gold Price Breakout Pushes RSI into Overbought Zone

Gold Price Outlook: XAU/USD

The price of gold stages a five-day rally after breaking out of a bull-flag formation, and bullion may continue to track the positive slope in the 50-Day SMA ($2578) as it holds above the moving average.

Gold Price Breakout Pushes RSI into Overbought Zone

The price of gold trades to a fresh record high ($2741) as it extends the series of higher highs and lows from last week, with the recent advance in the precious metal pushing the Relative Strength Index (RSI) back into overbought territory.

The move above 70 in the RSI is likely to be accompanied by a further advance in gold like the price action from last month, and the threat of a policy error may keep bullion afloat as there appears to be a growing dissent within the Federal Reserve.

Dallas Fed President Lorie Logan acknowledged that ‘a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals,’ with the official going onto say that ‘any number of shocks could influence what that path to normal will look like, how fast policy should move and where rates should settle’ while speaking at the Securities Industry and Financial Markets Association.

The comments suggest the Federal Open Market Committee (FOMC) will continue to unwind its restrictive policy in order to avoid a recession, but a growing number of Fed officials may look to switch gears at a slower pace as the central bank struggles to achieve the 2% target for inflation.

With that said, bullion may continue to serve as an alternative to fiat currencies as major central banks move towards a neutral policy, and the price of gold may continue to trade to fresh record highs as long as the RSI holds above 70.

XAU/USD Price Chart – Daily

Chart Prepared by David Song, Strategist; XAU/USD on TradingView

The price of gold may continue to trade to fresh record highs as it carves a series of higher highs and lows, with a close above the $2700 (23.6% Fibonacci extension) to $2730 (100% Fibonacci extension) region raising the scope for a move towards $2760 (38.2% Fibonacci extension).
Next area of interest comes in around $2810 (50% Fibonacci extension) but the bullish price series may unravel should bullion struggle to hold above the $2700 (23.6% Fibonacci extension) to $2730 (100% Fibonacci extension) region.
A breach below $2630 (78.6% Fibonacci extension) brings the monthly low ($2603) on the radar, with the next area of interest coming in around $2590 (100% Fibonacci extension).

Additional Market Outlooks

US Dollar Forecast: USD/JPY Vulnerable on Failure to Test August High

USD/CAD Rally Eyes August High as RSI Pushes into Overbought Zone

British Pound Forecast: GBP/USD Susceptible to Test of September Low

EUR/USD Outlook Hinges on ECB Interest Rate Decision

--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.