Gold prices edged higher on Monday, remaining near the all-time high of $2,265. Although the precious metal is experiencing some pullback, it retains a daily gain of 0.30%. XAU/USD currently trades at $2,240 after dipping to a daily low of $2,228.
US Economic Data Signals Strength
Positive readings on US manufacturing activity from both the Institute for Supply Management (ISM) and S&P Global signaled a robust economic outlook. This could deter the Federal Reserve (Fed) from pursuing interest rate cuts. The ISM Manufacturing PMI returned to expansionary territory for the first time since September 2022, pushing US Treasury bond yields higher – a headwind for non-yielding Gold. Investors reacted by offloading Gold for more attractive yields on US Treasuries.
The US Dollar Index (DXY), which gained 0.44% to 104.99, also put some downward pressure on XAU/USD.
Technical Outlook: Gold Price Momentum Weakening
The XAU/USD daily chart reveals a weakening bullish momentum as the Relative Strength Index (RSI) forms a negative divergence. The RSI reading of 77.21 during the recent all-time high is noticeably below the March 11 high of 84.41.
While a mean reversion move could occur, a sustained break below $2,200 could trigger a larger pullback towards the March 8 high turned support at $2,195, with a potential extension to $2,150.
On the bullish side, a decisive break above $2,270 would signal a bullish continuation, opening the door to a retest of the $2,300 mark.
