Gold Price Weakness Pulls RSI Back from Overbought Zone

Gold Price Outlook: XAU/USD

The recent weakness in the price of gold pulled the Relative Strength Index (RSI) back from overbought territory, but bullion may retrace the decline from the record high ($2686) as it no longer carves a series of lower highs and lows.

Gold Price Weakness Pulls RSI Back from Overbought Zone

The opening range for October is in focus for gold as the RSI falls below 70 to reflects a sell signal, but the pullback in bullion may up short lived should it continue to track the positive slope in the 50-Day SMA ($2509).

With that said, the change in regime by major central banks may continue to benefit the price of gold as it serves an alternative to fiat currencies, but the RSI may show the bullish momentum abating if it struggles to push back into overbought territory.

XAU/USD Price Chart – Daily

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

The price of gold snaps the recent series of lower highs and lows amid the failed attempt to close below $2630 (78.6% Fibonacci extension), with a breach above the September high ($2686) bringing $2730 (100% Fibonacci extension) back on the radar.
A move above 70 in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in bullion like the price action from earlier this year but the oscillator may start to diverge with price if the indicator struggles to push back into overbought territory.
Lack of momentum to push above the September high ($2686) may lead to a larger pullback in the price of gold, with a close below $2630 (78.6% Fibonacci extension) opening up $2590 (100% Fibonacci extension).

--- Written by David Song, Senior Strategist

Follow on X at @DavidJSong

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