Gold Reaches New All Time High

Amid ongoing geopolitical tensions, the price of gold ( XAUUSD ) is continuing to surge to new record highs. Despite reduced bets on a Fed rate cut and a strong US dollar, the price of gold (XAU/USD) has seen a persistent bullish trajectory over the past three weeks, climbing to the $2,400 neighborhood and marking a fresh all-time peak during early trading on Friday. The current market conditions, which are prompting some profit-taking around the metal due to its extremely overbought state, do not seem to be affecting the strong bullish sentiment surrounding gold. Investors remain apprehensive about the geopolitical risks engendered by conflicts in the Middle East, which have been a key factor driving the ongoing positive momentum. Furthermore, the expectation that major central banks will cut interest rates this year offers additional support to the non-yielding yellow metal.

Meanwhile, the US dollar (USD) has climbed to its highest level since November 14, buoyed by speculations that the Federal Reserve (Fed) may delay cutting interest rates. This expectation is underpinned by the hotter US consumer inflation figures released on Wednesday, which support elevated US Treasury bond yields and continue to boost the USD. However, this does not appear to have dampened the fervour surrounding the price of gold, suggesting that the path of least resistance for the XAU/USD is to the upside.

In the latest market developments, heightened tensions in the Middle East – amid a possible Iranian retaliation over a suspected Israeli strike on its embassy in Syria – have lifted the safe-haven gold price to a fresh all-time high on Friday. The cooler-than-expected US Producer Price Index released on Thursday has kept alive hopes for an imminent interest rate cut by the Federal Reserve, providing an additional boost to the XAU/USD. According to the CME Group's FedWatch tool, traders see a greater chance that the Fed will not start its rate-cutting cycle before the September policy meeting and fewer than two rate cuts this year.

New York Fed President John Williams has noted that inflation setbacks are not a surprise and that the central bank does not need to change policy in the near term, although it will eventually need to cut rates. Richmond Fed President Thomas Barkin has stated that the central bank is not yet where it wants to be on inflation, and that this week's CPI report did not increase his confidence that disinflation is spreading. The hawkish outlook has kept US Treasury bond yields elevated, allowing the US Dollar to remain near the YTD top, but it has done little to dampen the bullish sentiment surrounding the XAU/USD.

On a technical level, the strong positive momentum remains uninterrupted despite the overbought Relative Strength Index (RSI) on the daily chart which sits at 66.83. Bulls, however, have taken some profits near the $2,400 mark heading into the weekend, suggesting a need for caution before positioning for any further appreciation.