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• Gold price gains strong positive traction for the second straight day and hits a fresh record high.
• The Fed’s projected three rate cuts this year weigh on the USD and benefit the yellow metal.
• The prevalent risk-on mood prompts some profit-taking amid slightly overbought conditions.

Gold price (XAU/USD) retreats from a fresh record high touched earlier this Thursday, albeit manages to hold its neck above the $2,200 mark heading into the European session. The Federal Reserve (Fed) on Wednesday projected a 75 basis point rate cut by end-2024, keeping the US Dollar (USD) depressed near a one-week trough and pushing the non-yielding yellow metal higher for the second straight day. That said, elevated US Treasury bond yields help limit the downside for the Greenback.

Apart from this, the prevalent risk-on environment – as depicted by an extension of the recent bullish run across the global equity markets – caps the upside for the safe-haven Gold price amid slightly overbought conditions on the daily chart. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the XAU/USD remains to the upside, warranting some caution before positioning for any meaningful corrective fall in the near term. Traders now look to the release of flash PMIs for cues about the global economic health, which, in turn, might provide some impetus to the precious metal.

Daily Digest Market Movers: Gold price continues to draw support from bets for move Fed rate cuts

• The Federal Reserve on Wednesday maintained its projection of three rate cuts for this year, which weighs on the US Dollar for the second straight day and lifts the Gold price to a fresh all-time peak.
• Policymakers now see the US economy to grow at 2.1% this year compared to 1.4% expected previously, and the jobless rate is seen at 4% by the end of this year, versus 4.1% anticipated in December.
• The Personal Consumption Expenditures Price Index, excluding food and energy, is projected to rise at a 2.6% rate by year-end, compared to the 2.4% increase in the previous quarterly economic projections.
• In the post-meeting press conference, Fed Chair Jerome Powell said that inflation is moving down gradually on a somewhat bumpy road; the recent high inflation readings kept officials on a cautious footing.
• According to the CME Group's FedWatch Tool, traders are now pricing in a greater chance, around 75%, that the Fed will begin cutting interest rates at the June policy meeting, up from 59% on Tuesday.
• This leads to a modest decline in the US Treasury bond yields, dragging the US Dollar to a one-week low during the Asian session on Thursday and lending some support to the precious metal.
• A slightly overbought condition on the daily chart prompts some profit-taking at higher levels amid a positive tone around the equity markets, which tends to undermine the safe-haven XAU/USD.

Technical Analysis: Gold price needs to consolidate before the next leg up amid slightly overbought RSI

From a technical perspective, the overnight strong positive move confirmed a breakout through a bullish flag chart pattern and validated the positive outlook for the Gold price. That said, the Relative Strength Index (RSI) has moved back above the 70 mark, making it prudent to wait for some near-term consolidation or a modest pullback before traders start positioning for any further appreciating move. Nevertheless, the broader setup supports prospects for an extension of the recent well-established strong uptrend witnessed over the past month or so.

Meanwhile, any meaningful corrective decline below the $2,200-2,190 region is likely to attract fresh buyers and remain limited near the $2,160-2,158 horizontal zone. This is followed by the weekly swing low, around the $2,146 area, which, if broken decisively, might prompt some technical selling and drag the Gold price further towards the next relevant support near the $2,128-2,127 zone. The XAU/USD could decline further, eventually dropping to the $2,100 round figure.

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