Gold: Overbought Conditions Point to More Profit-Taking Ahead of US CPI Data

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Gold: Overbought Conditions Point to More Profit-Taking Ahead of US CPI Data
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Commodities Analysis by Fawad Razaqzada covering: Gold Spot US Dollar, Silver Spot US Dollar, US Dollar Index Futures, Gold Futures. Read Fawad Razaqzada's latest article on Investing.com

Gold traders eye potential pullbacks as overbought conditions hint at a possible correction.Key technical levels could guide the next move, with inflation data looming later this week.was little changed in the first half of Monday’s session, after closing last week flat as it struggled for direction all week.much, and not to mention the fact that the yellow metal remains severely overbought on all sorts of time frames, a correction of some sort is long overdue.

With the labor market still running strong, it’s no wonder Fed Chair Powell had already dismissed the idea of another 50-basis-point rate cut even days before the data came out.The dollar surged on the back of this report, although after an initial dip, gold found its footing again and recovered on Friday, riding the momentum alongside stock indices.

But with geopolitical risks adding uncertainty to the broader market, the potential downside could be limited.This week has some key data on the economic calendar that could shake things up. On Thursday, we’ve got the US CPI report, which is expected to show inflation cooling to 2.3% year-over-year, down from 2.5% in August.

For example, a noticeable dip in consumer confidence could hit future economic activity, possibly swaying Fed policy—and that could also play into gold’s performance.Gold's technical outlook remains bullish, as things stand. With prices hovering at extreme overbought levels on higher time frames, though, we could soon be witnessing the early stages of a bearish reversal, especially if the dollar continues to gain strength.

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