Gold price maintains its bid tone near record high, overbought RSI warrants caution for bulls

• Gold price rallies to a record peak on Thursday amid bets for a June Fed rate cut.
• The USD languishes near a month low and further lends support to the XAU/USD.
• A softer risk tone also benefits the safe-haven commodity, despite overbought RSI.

Gold price (XAU/USD) gains strong positive traction for the seventh straight day on Thursday and sticks to its intraday gains, near the record high during the early European session. Growing acceptance that the Federal Reserve (Fed) will start cutting interest rates in June keeps the US Dollar (USD) bulls on the defensive and turns out to be a key factor driving flows towards the non-yielding yellow metal. Apart from this, a generally softer tone, persistent geopolitical tensions and China's economic woes lend additional support to the safe-haven commodity.

Meanwhile, Minneapolis Fed President Neel Kashkari downplayed speculations about more aggressive policy easing. This, in turn, triggers a modest bounce in the US Treasury bond yields, which helps limit the downside for the Greenback. Apart from this, extremely overstretched conditions on the daily chart might further hold back traders from placing fresh bullish bets around the Gold price. Investors now look to Powell's second day of testimony, along with the US Weekly Initial Jobless Claims, for some impetus ahead of the NFP report on Friday. 

Daily Digest Market Movers: Gold price is underpinned by Fed rate cut bets and a softer risk tone

• Bets that the Federal Reserve will start cutting interest rates in June, along with geopolitical risks and China's economic woes, lifted the non-yielding Gold price to a record high on Wednesday.
• Fed Chair Jerome Powell told US lawmakers on Wednesday that if the economy evolves broadly as expected, the central bank can be expected to cut its benchmark interest rates later this year.
• The current market pricing indicates a greater chance, around 70% for a June Fed rate cut, which dragged the yield on the 10-year US government bond to a one-month low on Wednesday.
• Minneapolis Fed President Neel Kashkari said that he had penciled in two rate cuts in 2024 and added that he may reduce the number of cuts amid the incoming stronger macro data.
• The uncertainty about the Fed's rate-cut path, meanwhile, keeps the US Dollar close to its lowest level since early February and should continue to act as a tailwind for the precious metal.
• Three crew members were killed in a Houthi missile strike on a cargo ship off southern Yemen, marking the first fatalities since the Iran-backed group's attacks on vessels in the Red Sea.
• This raises the risk of a further escalation of military actions in the Middle East and supports prospects for an extension of the well-established short-term uptrend for the safe-haven commodity.
• Traders now look to the release of the US Weekly Initial Jobless Claims data and Fed Chair Jerome Powell's second day of testimony for some impetus ahead of the US NFP report on Friday.

Technical Analysis: Gold price might consolidate its recent strong gains before the next leg up

From a technical perspective, the recent breakout through the $2,064-2,062 strong horizontal barrier and a subsequent strength beyond the $2,100 mark was seen as a key trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart is already flashing extremely overbought conditions. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of the well-established short-term uptrend. Nevertheless, the Gold price seems poised to climb further towards the $2,200 psychological mark.

On the flip side, corrective declines might now be seen as a buying opportunity and remain limited near the $2,100 round figure. The said handle should act as a pivotal point, which if broken decisively could drag the Gold price back towards the $2,064-2,062 resistance-turned-support. Some follow-through selling will suggest that the XAU/USD has formed a near-term top and possibly shift the bias in favour of bearish traders.