Gold price pulls back after rising to fresh all-time high, bullish potential remains intact

• Gold price gains strong positive traction on Monday and spikes to a fresh all-time peak.
• The cautious market mood, along with dovish Fed expectations, benefits the XAU/USD.
• Overstretched conditions on the daily chart prompt some profit-taking at higher levels.

Gold price (XAU/USD) builds on its recent strong rally witnessed over the past three weeks or so and surges to a fresh record high, around the $2,144-2,145 region during the Asian session on Monday. The precious metal, however, surrendered a major part of its intraday gains and currently trades below the $2,100 mark, still up around 0.70% for the day. Bulls opt to take some profits off the table amid extremely overbought conditions on the daily chart and a modest US Dollar (USD) uptick. The downside remains cushioned in the wake of growing acceptance that the Federal Reserve (Fed) will start cutting interest rates by as soon as March 2024, which continues to benefit the non-yielding yellow metal.

Apart from this, the geopolitical uncertainty and fears of another COVID-19-like respiratory illness outbreak in China, which is seen weighing on investors' sentiment, might further limit any meaningful pullback for the safe-haven Gold price. An attack on an American warship and commercial vessels operating in the Red Sea fueled concerns over a further escalation in the Israel-Hamas war. Meanwhile, a surge in respiratory illnesses and clusters of pneumonia in children in China attracted the spotlight when the World Health Organization sought information last week. This contributes to cap the recent upswing in the global equity markets and could undermine the safe-haven XAU/USD.

Daily Digest Market Movers: Gold price hits fresh record higher amid the global flight to safety and Fed rate cut bets

• The global risk-on rally hit a roadblock after an attack on an American warship and commercial vessels in the Red Sea on Sunday by Iran-backed Houthi rebels in Yemen.
• A US military official confirmed that a "self-defence strike on an imminent threat" killed five Iraqi militants near the northern city of Kirkuk on Sunday afternoon.
• The risk of a further escalation of geopolitical tensions in the Middle East, along with a surge in cases of respiratory illnesses in China, boosts the safe-haven Gold price.
• This comes on the back of growing acceptance that the Federal Reserve (Fed) will maintain the status quo in December and start cutting rates as early as March 2024.
• Fed Jerome Powell on Friday said that it would be premature to conclude when policy might ease, pushing back against speculations of more aggressive rate cuts.
• Investors, however, seem convinced about an imminent shift in the Fed's policy stance, which drags the benchmark 10-year US Treasury yield to a 12-week low.
• Dovish Fed expectations, meanwhile, keep the US Dollar bulls on the defensive and lend additional support to the XAU/USD ahead of this week's important US macro data.
• This week's US economic docket highlights the release of the ISM Services PMI on Tuesday, followed by the ADP report on private-sector employment on Wednesday and the US crucial NFP report on Friday.
• A recent survey by the World Gold Council showed that 24% of all central banks intend to increase their Gold reserves in the next 12 months, as they increasingly grow pessimistic about the US as a reserve asset.

Technical Analysis: Gold price retreats amid extremely overbought RSI on the daily chart, downside seems cushioned

From a technical perspective, the intraday pullback drags the precious metal below the 23.6% Fibonacci retracement level of the rally from the November monthly swing low, around the $1,932-$1,931 region. The Relative Strength Index (RSI) on the daily chart is flashing extremely overbought conditions and holding back bulls from placing fresh bets around the Gold price.

Any further pullback, however, is likely to find support near the $2,079-2,080 area, or the previous all-time peak touched in May, below which the XAU/USD could slide to the 38.2% Fibo. level, around the $2063-2,062 zone. On the flip side, move back above the $2,095-2,100 immediate hurdle might now confront some resistance near the $2,118 area. Some follow-through buying should allow the Gold price to retest the record high around the $2,144-$2,145 region, which if cleared will reinforce the near-term positive outlook and pave the way for additional gains.