Gold sits at record highs above $2,250 after China's PMI

Gold price consolidates near all-time highs above $2,250 in the Asian session on Monday. Gold price continues to benefit from the Easter holiday-driven thin liquidity and Fed rate cut expectations. Strong China's Caixin Manufacturing PMI also cheers the bright metal traders.
>Technical Overview
As observed on the day chart, Gold price achieved the Bull Flag target measured at $2,251 on its way to renewing the lifetime highs at $2,260 on Monday.
The 14-day Relative Strength Index (RSI), lies in the extremely overbought zone near 80.0, suggesting that Gold price remains primed for a corrective pullback any time soon.
If that happens, the immediate support could be found at the previous record high of $2,236 set on Thursday. A breach of the latter could fuel a sharp drop toward the $2,200 threshold.
Further south, Thursday’s low of $2,187 will be challenged, followed by the bullish 21-day Simple Moving Average (SMA) at $2,168.
Should Gold buyers manage to defy the bearish odds, a test of the $2,270 round level cannot be ruled out.
The next on Gold buyers’ radars will be the $2,300 psychological level.
>Fundamental Overview
The US Dollar remains defensive, as markets set off the new quarter with optimism, especially after China’s Manufacturing and Services PMI data surpassed expectations in March. On Sunday, China’s official Manufacturing Purchasing Managers' Index (PMI) jumped to 50.8 in March, compared with the 49.1 contraction reported in February and above the estimates of a 49.9 figure. The Non-Manufacturing PMI rose to 53.3 in the same period vs. February’s 51.4. Meanwhile, China's Caixin Manufacturing Purchasing Managers' Index (PMI) edged higher to 51.1 in March on Monday, beating estimates of 51.0.
Additionally, increased bets that the US Federal Reserve (Fed) will begin lowering interest rates in June, following Friday’s US Personal Consumption Expenditures (PCE) Price Index, exert downside pressure on the US Dollar, keeping Gold price underpinned.
Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, increased slightly to 2.5% on a yearly basis in February, data released by the US Bureau of Economic Analysis (BEA) showed Friday. The reading met the consensus forecast and followed January’s 2.4% increase. The Core PCE Price Index, which excludes volatile food and energy prices, rose at an annual pace of 2.8%, in line with the market expectations but slowing from a 2.9% increase reported previously.
Markets are currently pricing a 68% probability of a June Fed rate cut, up from 63% seen before the PCE data release. Heightened expectations of a June Fed rate cut come even after Fed Chair Jerome Powell said Friday that “the economy is strong” and there is “no hurry to cut rates.” Powell participated in a discussion at the Macroeconomics and Monetary Policy Conference, in San Francisco, on Friday.
Looking ahead, the US Nonfarm Payrolls data, due on Friday, will be critical to sealing in a June Fed rate cut, having a significant impact on the value of the US Dollar and on the Gold price direction. In the meantime, the return of full markets in the US after the long Easter weekend break could trigger a bout of profit-taking in Gold price, as markets resort to position readjustment, in anticipation of the US employment data, trickling in from Tuesday.
Later on Monday, the US ISM Manufacturing PMI data will be also closely scrutinized for fresh hints on the strength of the US economy, influencing the market’s pricing of the Fed rate cut expectations and, in turn, the non-interest-beating Gold price.
*Source: fxstreet