Gold Retreats from Fresh Highs Around $2,740

Gold trimmed early gains and now hovers around $2,720 per troy ounce, pressured by renewed demand for the US Dollar. Resurgent US Treasury yields and the looming US elections add to the mix as well.

Gold continues to rise steadily across all time frames (short, medium, and long term). After breaking the $2,700 mark, it is now aiming for the next target at $2,750.

However, the Relative Strength Index (RSI) is currently overbought, advising long-holders not to add to their positions due to increased risks of a pullback. If the RSI closes back into neutral territory, it will signal long-holders to close their positions and open shorts, as a deeper correction could develop. Support levels are seen at $2,700 (key level) and $2,685 (September high).

Gold’s strong overall uptrend, however, suggests that any corrections are likely to be short-lived, with the broader bull trend resuming afterward.

Fundamental Overview

Gold (XAU/USD) has already climbed 0.5% during the European session on Monday, trading in the $2,730s after rising over 1.0% on Friday. The metal’s appeal as a safe haven has increased due to intensifying conflicts in the Middle East and the People's Bank of China (PBoC) moving to further ease credit conditions by cutting interest rates.

The PBoC’s decision to lower its one-year and five-year loan prime rates not only boosts gold’s attractiveness as a non-interest-bearing asset but also indicates potential for increased demand from Chinese investors and private buyers, who already constitute the largest gold market in the world.

Middle East Tensions Push Gold Higher

Gold rallies as investor demand for safety rises due to the deepening Middle East conflict. Israel has intensified its bombardment of Beirut, targeting economic hubs in an effort to dismantle the bank that funds Hezbollah. This bank, which serves Lebanon’s Shiite population, acts as the main conduit for donations to Hezbollah, including $50 million annually from Iran, according to Bloomberg News. By destroying it, Israel aims to cut off Hezbollah’s principal funding source and sow discord within Hezbollah and the Lebanese Shiite community.

Additionally, Israel’s retaliatory strike on Iran is back on the agenda after an Iranian drone penetrated Israel's air-defense systems and exploded near Prime Minister Benjamin Netanyahu’s private residence. Following the incident, Netanyahu convened several emergency meetings to prepare for Israel’s delayed strike on Iran.