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