Gold extends rally to fresh multi-week highs, closes in on $1,700

• Gold rose to its highest level in over two weeks on Monday.
• Falling US T-bond yields, broad dollar weakness fuel XAU/USD's rally.
• ISM Manufacturing PMI's Priced Paid component continued to fall in September.

Gold gathered bullish momentum and climbed above $1,690 for the first time since mid-September. As of writing, XAU/USD was trading at $1,690, where it was up 1.7% on a daily basis.

The sharp decline witnessed in the US Treasury bond yields seems to be fueling gold's rally on the first trading day of the fourth quarter. The benchmark 10-year US T-bond yield was last seen losing 5.5% on the day at 3.6%. Reflecting the negative impact of falling yields' on the dollar's market valuation, the US Dollar Index is down 0.3% on the day below 112.00.

The data published by the ISM showed on Monday that the Manufacturing PMI declined to 50.9 in September from 52.8 in August. This pring fell short of analysts' estimate of 52.2. Additionally, the Prices Paid component of the PMI survey fell to 51.7 from 52.2, pointing to a further easing of input price pressures. 

After this report, the probability of one more 75 basis points Fed rate hike in November declined toward 50%, revealing a shift in market positioning ahead of this week's highly-anticipated September jobs report. 

Meanwhile, the improving market mood, as reflected by Wall Street's main indexes' impressive gains, is not allowing the dollar to stage a rebound. 

Several FOMC policymakers will be delivering speeches later in the session but gold should manage to end the day with strong gains unless there is a decisive rebound in US T-bond yields.

Technical levels to watch for