Gold holds firm above $4,000, momentum cools after fresh record high
- Gold holds steady above the $4,000 psychological mark on Thursday after surging to a fresh all-time peak of $4,059 the previous day.
- Dovish Fed expectations and the prolonged US government shutdown keep safe-haven demand intact.
- Technically, Gold’s uptrend stays intact as the metal continues its spree of record highs, though momentum looks stretched.
Gold (XAU/USD) is under modest pressure on Thursday after smashing through the $4,000 psychological mark and setting a fresh all-time high of $4,059 on the previous day. At the time of writing, XAU/USD is trading around $4,025, down nearly 0.50% on the day, as bulls struggle to extend gains beyond the $4,050 resistance zone.
The remarkable rally in Gold comes amid a broader “buy everything” across global markets, with US equities, Bitcoin, and even the US Dollar (USD) climbing simultaneously. The simultaneous strength of risk assets and traditional havens reflects a complex mix of optimism over monetary policy easing and lingering uncertainty around growth, inflation, and geopolitics.
The broader outlook for Bullion remains tilted to the upside, with any pullbacks likely to attract dip-buying interest. Expectations of two more interest rate cuts by the Federal Reserve (Fed) this year continue to support Gold, keeping Treasury yields under pressure. At the same time, persistent geopolitical and fiscal concerns, including the prolonged United States (US) government shutdown and political shake-up in Europe and Japan, are reinforcing safe-haven demand and helping the metal hold near record territory.
Market movers: Gold holds firm amid US shutdown, dovish Fed tone and easing Middle East tensions
- On Wednesday, US President Donald Trump announced via his Truth Social platform that Israel and Hamas had agreed to the first phase of a US-brokered Gaza peace plan. The development helped ease immediate geopolitical tensions, limiting Gold’s advance. Still, investors remain cautious given the uncertainty and fragility of such deals, while the ongoing Russia-Ukraine war continues to keep broader geopolitical risks elevated.
- The US government shutdown entered its ninth day on Thursday after the Senate failed for the sixth time to advance a GOP-backed stopgap funding bill. The measure fell short in a 54-45 vote, with all Democrats and several Republicans voting against it, leaving no clear path toward reopening federal operations. The prolonged stalemate is adding to market uncertainty, dampening risk sentiment and reinforcing expectations of slower economic activity if the impasse drags on.
- The prolonged US government shutdown has already disrupted the flow of economic data, with last week’s Nonfarm Payrolls (NFP) and Weekly Initial Jobless Claims reports postponed. Thursday’s Jobless Claims data are also expected to be delayed, raising the risk that next week’s Consumer Price Index (CPI) release could face similar setbacks if the impasse persists. The lack of timely data leaves investors and the Federal Reserve navigating with limited visibility on the economy.
- New York Fed President John Williams said earlier on Thursday that he supports additional interest rate cuts, noting that the slowdown in job growth warrants attention but that the economy is not on the verge of a recession, according to The New York Times. Williams added that the inflation outlook is not as dire as earlier in the year and that a softening labor market would help bring price pressures under control. Fed Chair Jerome Powell refrained from commenting on monetary policy or the economic outlook during his appearance on Thursday.
- The Fed released the September Federal Open Market Committee (FOMC) meeting Minutes on Wednesday, revealing that most officials support additional rate cuts later this year, although several members cautioned against moving too quickly given persistent inflation pressures. The minutes highlighted rising risks to the labor market, with unemployment edging higher and job growth moderating.
Technical analysis: XAU/USD steadies near record highs, bullish tone intact
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From a technical standpoint, Gold’s trend remains decisively bullish, though stretched. The metal continues to trade comfortably above its key moving averages, suggesting that buyers still have the upper hand.
Immediate support lies at the $4,000 psychological level. Below that, the 21-period Simple Moving Average (SMA) on the 4-hour chart near $3,992 should act as the next cushion. The 50-period SMA at $3,916 and the 100-period SMA at $3,819 offer deeper support zones and are likely to attract dip-buying interest if the market pulls back further.
Momentum indicators show the trend remains strong but slightly stretched. The Relative Strength Index (RSI) is hovering near 69, suggesting a potential pause or consolidation before the next leg higher. The Average Directional Index (ADX) around 39 confirms that the broader bullish structure remains intact, though momentum could ease if Gold fails to sustain gains above the $4,050 resistance area.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
