XAU/USD outlook: Gold extends rally into uncharted zone

XAU/USD

Gold rose to new record high ($3659) in early Tuesday’s trading, after strong acceleration on Monday (up 1.5%) which resulted in break and close above psychological $3600 barrier.

The latest economic data from the US showed that labor market continues to weaken (weakness further accelerated in August) that adds to strong expectations for Fed rate cut in the policy meeting next week.

Growing uncertainty over political crisis in the US and the latest negative developments in France after the government collapsed, as well as fragile political situation in the UK were the main political factors.

Worsening geopolitical situation on intensifying clashed in Ukraine and the Middle East and the latest crisis in Caribbean region (Venezuela) as well as darkening economic outlook, particularly in Europe, were also behind the latest rally into safety.

Technical pictures remain firmly bullish but overbought conditions on daily chart (although RSI and Stochastic continue to head north) warn that bulls may start losing traction.

Consolidation and shallow dips would be likely scenario, as bullish sentiment remains strong in current environment.

Broken $3600 level reverted to solid support which should ideally contain dips and confirm positioning for fresh push towards targets at $3690/$3700) Fibo projection / round-figure).

Res: 3668; 3690; 3700; 3434.
Sup: 3628; 3600; 3577; 3540.

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