Gold Supported by Dovish Fed Signals
Gold (XAU/USD) maintains modest intraday gains during the early European session, trading just below a near three-week high reached on Tuesday. Concerns over the economic impact of the longest-ever United States government shutdown continue to support demand for the safe-haven asset. Additionally, growing expectations for a rate cut by the United States Federal Reserve (Fed) in December provide further momentum for the non-yielding yellow metal.
A recent breakthrough in negotiations to reopen the United States government has lifted overall market sentiment. However, light trading volumes due to a bank holiday in the United States and a modest uptick in the US Dollar (USD) are limiting aggressive bullish positioning in XAU/USD. Still, dovish Fed expectations may cap USD strength and suggest that gold’s path of least resistance remains upward.
Late Sunday, the Senate reached a compromise to end the government shutdown that began on October 1. Investors now await a wave of delayed economic data to assess growth risks tied to the closure.
The University of Michigan’s Consumer Sentiment Index dropped to 50.3 in November—its lowest since June 2022—down from 53.6 in October. This reinforces the market’s dovish stance toward the Fed, which continues to benefit gold.
According to the CME FedWatch Tool, there is now a 60%+ probability of a Fed rate cut in December. This weakens the USD’s appeal and strengthens the bullish case for XAU/USD. However, the risk-on mood in broader markets calls for caution before expecting further upside.
With US banks closed Tuesday for Veterans Day, gold and the USD remain sensitive to Fed rate expectations. Traders will closely monitor speeches from key FOMC members on Wednesday for clues about future monetary policy.
Technically, XAU/USD has stabilized above the 50% Fibonacci retracement of its recent decline from October’s all-time high. Positive momentum indicators on the daily chart support a near-term bullish outlook. A breakout above the $4,155–$4,160 resistance zone could open the door to a move toward the $4,200 level, which aligns with the 61.8% Fibonacci retracement.
On the downside, support is seen at the $4,115 low from the Asian session, followed by the $4,100 round figure and the $4,075 zone (38.2% Fibo). A break below these levels could trigger technical selling and push gold toward $4,025, with further downside risk to $4,000 and eventually $3,936–$3,900.