XAU/USD settles just shy of $3,700 as the Fed looms

XAU/USD Current price: $3,690.20

• The Federal Reserve is expected to cut the benchmark rate by 25 bps on Wednesday.
• Upbeat United States data was not enough to rescue the US Dollar.
• XAU/USD consolidates near $3,700, bulls pause ahead of Federal Reserve’s announcement.

The record run of Gold prices continued on Tuesday, with the bright metal surpassing the $3,700 mark for the first time ever amid broad US Dollar (USD) weakness. The XAU/USD pair traded as high as $3,703.08 early in the American session.

Gold retreated despite persistent USD selling and increasing caution ahead of the Federal Reserve (Fed) monetary policy announcement on Wednesday. Profit-taking could partially explain Gold’s retracement, as market participants anticipate the first of three interest rate cuts before the year’s end. Policymakers have not yet confirmed other than 50 basis points (bps) interest rate cuts for 2025, meaning markets anticipate a dovish announcement. Should Chair Jerome Powell refrain from hinting at interest rate cuts in October and December, the tide may turn, with the USD finding unexpected yet temporary strength.

Financial markets pretty much ignored better-than-anticipated United States (US) data. The country released Retail Sales, which were up 0.6% in August, above the 0.2% forecast. Also, Import Prices rose 0.3% on a monthly basis in the same month, while Export Prices also gained 0.3% vs the -0.1% and 0.2% expected respectively. Finally, the US published August Industrial Production, which ticked 0.1% up after sliding 0.4% in the previous month, and Capacity Utilization, which held steady at 77.4%.

XAU/USD short-term technical outlook

From a technical point of view, the daily chart for the XAU/USD pair is showing modest signs of upward exhaustion. Technical indicators are losing their upward strength in extreme overbought territory, with the Relative Strength Index (RSI) indicator at around 81. Furthermore, the pair is far above all its moving averages, with a bullish 20 Simple Moving Average (SMA) at around $3,516, over $200 above the longer ones.

In the near term, and according to the 4-hour chart, the XAU/USD pair has room to extend its advance. A mildly bullish 20 SMA provides support at around $3,657, while the 100 and 200 SMAs accelerated north far below the shorter one. At the same time, the Momentum indicator resumed its advance within positive levels, while the RSI indicator seesaws directionless at around 70.

Support levels: 3,674.30 3,657.30 3,642.00

Resistance levels: 3,705.00 3,720.00 3,735.00