Gold softens after record rally but remains on track for ninth weekly gain
- Gold hits another all-time high near $4,380 before slipping below $4,300.
- Gold’s market capitalization surpasses $30 trillion, highlighting the scale of global inflows into Bullion.
- Traders fully price in back-to-back 25 bps Fed rate cuts at the October and December monetary policy meetings.
Gold (XAU/USD) edges lower after hitting yet another all-time high near $4,380 on Friday as investors seek a reliable store of value amid geopolitical, economic and fiscal uncertainty. At the time of writing, XAU/USD is trading around $4,230, easing from record highs as the US Dollar (USD) and Treasury yields rebound while traders lock in partial profits. Despite the sharp pullback, the metal remains on track for its ninth consecutive weekly gain.
Lingering concerns over the prolonged US-China trade standoff remain a key driver behind Gold’s recent surge as trade tensions continue to cast a shadow over global growth prospects. The rally drew additional fuel after United States (US) regional banking stress headlines grabbed investors’ attention and stoked risk aversion, with the ongoing US government shutdown further dampening market sentiment.
Furthermore, traders are now fully pricing in back-to-back 25-basis-point interest rate cuts by the Federal Reserve (Fed) at its October and December monetary policy meetings, adding another layer of support to Bullion’s record-breaking rally as lower interest rates enhance its appeal as a non-yielding asset.
Market movers: Gold hits $30T cap as Fed cuts and trade frictions drive flows
- Gold’s total market capitalization has climbed above $30 trillion for the first time, reflecting the metal’s record-breaking rally and sustained safe-haven demand. The surge in value underscores the scale of global inflows into Bullion, which now far outpaces major assets such as Bitcoin and leading US tech giants.
- Fresh turbulence in US regional banks added to market anxiety late Thursday. Zions Bancorp reported about $50 million in loan losses tied to two borrowers accused of providing false information, while Western Alliance Bancorp filed a fraud lawsuit against one of its clients over disputed collateral.
- White House Senior Adviser Kevin Hassett told Fox Business Network that US banks hold ample reserves and the administration remains optimistic about credit conditions. He added that if the government shutdown extends beyond the weekend, President Trump may ramp up actions, while calling the three expected Fed rate cuts “a good start.”
- According to the CME FedWatch Tool, traders assign a 96.8% probability of a 25-basis-point rate cut at the October 29-30 FOMC (Federal Open Market Committee) meeting, while the December 10-12 meeting shows an 81.3% chance of another 25 bps cut and 18.1% odds of a larger 50 bps move.
- US President Donald Trump said on Friday that his planned 100% tariffs on Chinese imports are “not sustainable,” while reiterating that the measures were a response to Beijing’s tightening of rare-earth export controls. He added that he expects to meet Chinese President Xi Jinping within the next two weeks.
- China accused the US of violating WTO rules and engaging in discriminatory trade practices, while also criticizing Washington for stoking panic over its rare earth controls. Despite the sharp rhetoric, Beijing signaled a willingness to resume trade talks, offering a faint glimmer of hope for de-escalation.
Technical analysis: XAU/USD eases from record peak as traders book profits
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XAU/USD is pulling back from fresh record highs reached earlier on Friday as traders book profits following an overextended rally. Despite the intraday correction, the broader bullish structure remains intact, suggesting that any dips are likely to attract fresh buying interest.
On the 4-hour chart, immediate support lies at the 21-period Simple Moving Average (SMA) near $4,230, followed by the 50-SMA around $4,115. The Relative Strength Index (RSI) has eased to around 64, retreating from overbought territory, which could allow prices to consolidate before the next leg higher.
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.
