Gold remains close to all-time peak amid Fed's dovish stance and geopolitical tensions

• Gold continues to draw support from the Fed’s dovish signal and rising geopolitical tensions.

• The USD prolongs its recovery from a multi-year peak and might cap gains for the commodity.

• A positive risk tone could further act as a headwind for the XAU/USD pair ahead of Fedspeak.

Gold (XAU/USD) struggles to capitalize on Friday's move higher and oscillates in a narrow trading band below the $3,700 mark at the start of a new week. The US Dollar (USD) is seen building on last week's solid recovery from the lowest level since July 2022, touched in reaction to the Federal Reserve's (Fed) dovish rate cut, and turning out to be a key factor acting as a headwind for the commodity. Apart from this, a generally positive tone around the equity markets contributes to capping the upside for the safe-haven precious metal.

Despite the aforementioned negative factors, the XAU/USD pair remains close to the all-time peak amid a broadly supportive fundamental backdrop. The US central bank signaled that two more rate cuts would follow through the end of this year after lowering borrowing costs for the first time since December, which continues to benefit the lower-yielding Gold. Furthermore, rising geopolitical tensions and persistent trade-related uncertainties suggest that the path of least resistance for the precious metal remains to the upside.

Daily Digest Market Movers: Gold bulls retain control amid favorable fundamentals

The Federal Reserve's dovish outlook continues to act as a tailwind for the non-yielding Gold, which remains within striking distance of the $3,700 mark and the all-time peak touched last week. The US central bank lowered its benchmark rate for the first time since December and indicated the need for two more rate cuts this year amid concerns about a softening US labor market.

However, Fed Chair Jerome Powell said that risks to inflation are tilted to the upside and the move to lower interest rates was a risk management cut. Powell added that he doesn't feel the need to move quickly on rates and that the Fed is in a meeting-by-meeting situation regarding the outlook for interest rates. The outlook lifts the US Dollar to an over one-week high on Monday.

Nevertheless, traders still believe that interest rates will drop much faster than the Fed is planning and are now betting on the possibility that the short-term rate, currently in the 4.00%-4.25% range, will fall under 3% by the end of 2026. Stock markets are riding this optimism to record highs, which contribute to capping the upside for the safe-haven precious metal during the Asian session.

The US Supreme Court set a date of November 5 for arguments concerning the legality of President Donald Trump's sweeping global tariffs. A lower court ruled that Trump had overstepped his authority in imposing most of his tariffs under a federal law meant for emergencies. Trump's tariffs, however, remain in effect during the appeal to the Supreme Court and keep investors on edge.

NATO forces intercepted three Russian MiG-31 fighters on Friday after they entered Estonia's airspace. Trump expressed his displeasure at the incursion and said he would help defend European Union members if Russia intensified hostilities. This keeps geopolitical risks in play, which could benefit the precious metal's safe-haven status and backs the case for additional gains.

There isn't any relevant market-moving economic data due for release from the US on Monday. However, speeches from influential FOMC members, including Powell, might influence the USD price dynamics later during the North American session and produce short-term trading opportunities around the XAU/USD pair.

Gold might struggle to build on momentum beyond $3,700 amid still overbought daily RSI

From a technical perspective, last week's rebound from a bullish flag pattern resistance breakpoint, around the $3,628 region, and the subsequent move up favor the XAU/USD bulls. That said, the daily Relative Strength Index (RSI) is still pointing to slightly overbought conditions and warrants some caution before positioning for any further gains. Hence, any further move up beyond the $3,700 mark is more likely to confront some resistance near the $3,707 region, or the all-time peak. A sustained strength beyond the latter, however, would set the stage for an extension of the recent well-established uptrend witnessed over the past month or so.

On the flip side, the $3,672-3,670 area now seems to protect the immediate downside. Any further corrective slide might still be seen as a buying opportunity and remain cushioned near the $3.628-3,626 resistance-turned-support. A convincing break below the latter, however, might prompt some technical selling and drag the Gold price to the $3,600 mark. The downfall could extend further towards the $3,563-3,562 support en route to the $3,511-3,510 region, which could act as a strong base for the XAU/USD pair.