Gold: Testing fresh highs – OCBC

Gold extended its run higher, hitting intra-day high of 3875 levels, before backing off. Risk of US government shutdown raises concerns of economic slowdown. XAU last seen at 3876 levels., OCBC's FX analysts Frances Cheung and Christopher Wong note.

Underlying momentum remains bullish

"Earlier, Trump has threatened mass firings of federal workers if government shutdown is not averted. Underlying momentum remains bullish but RSI remains in overbought conditions. Resistance at 3,890 (138.2% fibo extension), 4,006 levels (150% fibo ext). Support at 3,750, 3,657 (21 DMA) and 3,500."

"While the underlying bias remains bullish, supported by central bank purchases, rise in gold ETF flows, Fed easing cycle (lower opportunity cost), tariff uncertainties, we do caution (albeit low probability) that any surprise twist in averting a slowdown before midnight (30 Sep US time) may see the exuberant run-up correct lower."

"Nevertheless, a shutdown persisting for longer should see gold prices extend higher. The last shutdown in 2018-19 (during Trump presidency 1.0) was one of the longest (over 30 days) in modern history."