Dollar Strength Keeps Gold in Check
On Friday, gold (XAU/USD) recovered part of its intraday losses after an early dip, yet continues to trade with a negative bias during the European session. The US Dollar remains firm near a three-month high, supported by the Federal Reserve’s hawkish stance. The central bank of the United States has pushed back against expectations for a rate cut in December, which has weighed on the appeal of the non-yielding yellow metal.
Federal Reserve Chair Jerome Powell stated that a rate cut in the upcoming meeting is “not a given,” which has strengthened the US Dollar against other currencies and increased selling pressure on gold. Meanwhile, optimism surrounding easing trade tensions between the United States and China has further reduced demand for safe-haven assets. The recent agreement includes tariff reductions by the United States and renewed soybean purchases by China.
The United States government shutdown has entered its fifth week, with a budget impasse in Congress fueling economic concerns. This could limit further gains in the US Dollar and, alongside geopolitical risks, offer support to gold. Notably, the President of the United States ordered the resumption of nuclear testing, prompting a response from Russia and raising fears of escalating tensions—adding caution to market sentiment.
Technically, the XAU/USD pair has stabilized above the 23.6% Fibonacci retracement level of its recent decline from the all-time high, but still struggles to break the $4,050 resistance. A decisive move above this level could trigger fresh buying and lift prices toward $4,075 (38.2% Fibo) and eventually $4,100.
On the downside, initial support lies near $3,950, followed by the $3,917–3,916 zone and the $3,900 round figure. A break below $3,886, the three-week low, could expose gold to further losses toward $3,850–3,845 and possibly $3,800, with deeper support near $3,765–3,760.
In summary, gold remains in a volatile state—pressured by a strong US Dollar and trade optimism, yet supported by geopolitical risks and the prolonged US government shutdown. Traders now await comments from FOMC members to gauge the future path of interest rates and dollar demand. Despite the fluctuations, gold is on track to post its third consecutive monthly gain.