Geopolitical Risks Support Gold
Gold extends range play below record high amid positive risk tone; bullish bias remains
Gold (XAU/USD) remains confined in a narrow trading band through the first half of the European session as bulls seem reluctant to place fresh bets amid still overbought conditions. Meanwhile, investors appear unfazed by a partial United States government shutdown, which is evident from the generally positive tone in equity markets and continues to cap the safe-haven metal. That said, dovish Federal Reserve (Fed) expectations keep the US Dollar (USD) on the defensive and act as a tailwind for the non-yielding yellow metal.
Traders increased bets that the US central bank will lower borrowing costs two more times this year following Wednesday's disappointing ADP employment report. This, along with rising geopolitical tensions, supports the case for further near-term appreciation in Gold. Any corrective pullback is still likely to be seen as a buying opportunity.
Daily Digest Market Movers: Gold bulls cautious as risk-on mood offsets dovish Fed The President of the United States’ Republican Party failed to agree with opposition Democrats on a spending bill. Investors, however, reacted little, expecting limited economic impact from the government shutdown. This supports the positive risk tone and acts as a headwind for Gold during the Asian session.
On the data front, ADP reported that private-sector employers shed 32K jobs in September, the largest drop since March 2023. August payrolls were also revised down to show a loss of 3K instead of the initially reported 54K gain. The data reinforced bets for two more Fed rate cuts by year-end.
Meanwhile, the ISM Manufacturing PMI improved slightly from 48.7 to 49.1 in September, helping the USD bounce off a one-week low. However, dovish Fed expectations continue to support Gold.
According to the Wall Street Journal, the United States will provide Ukraine with intelligence to support long-range missile strikes on Russian energy infrastructure. The President of the United States approved the move, and officials are urging NATO allies to do the same. This keeps geopolitical risks in play and should limit any corrective decline in Gold.
Important US macro releases, including the Nonfarm Payrolls (NFP) report, are likely to be delayed due to the partial United States government shutdown. Hence, speeches from influential FOMC members will play a key role in driving USD demand and short-term moves in XAU/USD.
Technical Outlook: The daily RSI remains in overbought territory, holding back fresh bullish bets. Still, the lack of meaningful sellers and a rebound from sub-$3,800 levels earlier this week validate the near-term positive outlook. Support lies near $3,825–3,820, with deeper losses possible below $3,800 toward $3,758–3,757 and $3,700. On the upside, consolidation may precede another leg higher.