Gold prices (XAU/USD) retreated on Monday, trading in the $2,630s per troy ounce. This pullback follows a record-breaking rally last week, fueled by the Federal Reserve’s aggressive rate cut. However, a surge in Chinese stocks and a positive outlook for the Chinese property market are enticing investors away from gold’s safe-haven appeal.
Shifting Investor Focus:
- Chinese Stock Rally: The CSI 300 index soared over 7.5% on Monday, attracting investor capital away from gold.
- Brighter Outlook for Chinese Property: Falling mortgage rates are boosting the Chinese property market, further reducing demand for gold as a safe haven.
Fed Rate Cuts and Gold’s Future:
- The Fed’s recent rate cut lowered the opportunity cost of holding gold, contributing to its prior rally.
- While chances for another aggressive 50-basis-point cut in November remain above 50%, better-than-expected US data has tempered expectations slightly.
Mixed Views on Gold’s Short-Term Outlook:
- Analysts’ Opinions:
- Darin Newsom (Barchart.com) expects the uptrend to continue due to potential global uncertainty.
- Ole Hansen (Saxo Bank) sees a correction due to momentum-driven buying and potential softening in physical demand.
- Adrian Day (Adrian Day Asset Management) predicts a short-term pause followed by renewed bullishness from Western investors.
Technical Analysis:
- Gold is experiencing a pullback after reaching record highs.
- The overall uptrend remains intact, but the Relative Strength Index (RSI) suggests it was overbought.
- A daily RSI close below 70 could signal a deeper correction. Support levels lie at $2,600, $2,550, and $2,544.
- However, the entrenched uptrend suggests a potential for bulls to regain control and push prices higher. Breakouts above $2,700 and $2,750 could confirm this trend.