FX.co ★ XAU/USD, GOLD

Gold technical analysis Gold (XAU/USD) builds on the overnight breakout momentum beyond the $4,100 mark and prolongs its recent record-setting run through the Asian session on Tuesday. Against the backdrop of economic uncertainties on the back of the US government shutdown, renewed US-China trade tensions continue to drive safe-haven flows towards the bullion. Furthermore, geopolitical risk and firming expectations for more interest rate cuts by the US Federal Reserve (Fed) turn out to be other factors benefiting the non-yielding yellow metal. Meanwhile, US President Donald Trump's pivot on China tariffs remains supportive of the upbeat market mood. This, however, does little to dent the underlying strong bullish sentiment surrounding the Gold. Moreover, bullish traders seem unaffected by the recent US Dollar (USD) rise, suggesting that the path of least resistance for the commodity remains to the upside. That said, extremely overbought conditions warrant caution before positioning for any further gains ahead of Fed Chair Jerome Powell's appearance later this Tuesday. With no resolution in sight, the stalemate over how to reopen the US government will extend into a third week as Democrats and Republicans continue to trade blame for the shutdown that began on October 1. The Senate returns on Tuesday and is expected to vote again on the funding plan, which has fallen short of the necessary 60-vote threshold seven times.

From a technical perspective, the recent move up witnessed over the past three weeks or so has been along an upward-sloping trend-line support. Moreover, the overnight breakout through the $4,055-4,060 horizontal resistance and a subsequent strength beyond the $4,100 mark reaffirm the near-term positive outlook for the XAU/USD pair. However, the daily Relative Strength Index (RSI) is flashing extremely overbought conditions and warrants caution before positioning for a further appreciating move. Meanwhile, any meaningful corrective pullback might now be seen as a buying opportunity and is more likely to remain cushioned near the $4,060-4,055 region. A convincing break below the latter, however, might prompt some technical selling and drag the Gold price to the $4,000 psychological mark en route to the ascending trend-line support, currently pegged near the $3,985 zone. Some follow-through selling could be seen as the first sign of a possible bullish exhaustion and pave the way for deeper losses.