Gold stalls below record peak as market awaits $4,000 breakout

Gold (XAU/USD) continues its historic climb, notching yet another all-time high near $3,991 on Tuesday. The precious metal’s advance reflects deepening market anxiety as investors seek refuge in safe-haven assets amid the prolonged United States (US) government shutdown and mounting expectations of further interest rate cuts by the Federal Reserve (Fed).

At the time of writing, XAU/USD is trading around $3,977, consolidating below its record highs during the American session. The pause suggests that near-term momentum may be easing, with traders turning cautious as the metal approaches the $4,000 psychological mark, while momentum indicators flag risks of uptrend exhaustion.

A renewed strength in the US Dollar (USD) is also tempering Gold’s advance. The Greenback’s gains come as political upheaval in Japan and France rattles currency for a second day, prompting flows back into the USD, which in turn is acting as a short-term headwind for Bullion.

In the wider context, investors continue to position for a more dovish Fed, with markets pricing in back-to-back rate cuts in October and December. The lower-rate outlook, alongside persistent geopolitical tensions and steady central bank buying, keeps the longer-term trajectory for Bullion tilted to the upside.

Market movers: US Dollar rises as the US shutdown drags on

• The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, is up nearly 0.33%, trading around 98.42, close to a one-month high.
• China’s central bank added Gold to its reserves for the eleventh straight month in September, with People's Bank of China (PBOC) data on Tuesday showing holdings rising to 74.06 million fine troy ounces from 74.02 million in August.
• The US government shutdown has entered its seventh day with no clear sign of a deal to end the stalemate. On Monday, the Senate held a fresh vote on a stopgap funding bill to reopen the government, but it failed as expected with a margin of 52-42, falling short of the 60 votes needed by Republican leadership to advance the measure.
• The prolonged US government shutdown is raising downside risks to the labor market, with the White House warning that an extended impasse could result in a permanent reduction in federal workforce levels. On Monday, President Trump told reporters he was open to negotiating with Democrats over healthcare subsidies, saying, “We are speaking with the Democrats, and some very good things could happen with respect to health care.”
• Kansas City Fed President Jeff Schmid struck a hawkish tone on Monday, saying the “current stance of policy is only slightly restrictive, which I think is the right place to be,” stressing that “inflation is too high” and that the cooling labor market is “consistent with relieving price pressure and returning inflation to 2%.”
• Looking ahead, the US economic calendar is relatively light, with attention turning to remarks from Atlanta Fed President Raphael Bostic, Fed Governors Michelle Bowman and Stephen Miran, and Minneapolis Fed President Neel Kashkari.

Technical analysis: XAU/USD technicals flag overextended rally despite firm uptrend

The daily chart shows Gold’s uptrend remains firmly in place, with spot prices trading well above key moving averages. Immediate support is seen at the $3,950 level, followed by a stronger floor near $3,900, while the 21-day SMA at $3,756 sits further below as the next dynamic support.

Momentum indicators highlight stretched conditions with the Relative Strength Index (RSI) at 83.41 and the Stochastic Oscillator near 97, both signaling that the market is in deeply overbought territory.

Trend strength remains robust, as reflected by an elevated ADX reading above 53, yet the combination of strong trend and extreme momentum readings warns that the uptrend may be approaching exhaustion, increasing the risk of a short-term pullback toward lower support levels.