Gold eases after refreshing record high; bullish potential seems intact
- Gold struggles to capitalize on its modest Asian session rise to a fresh all-time high.
- A combination of supporting factors might continue to support the precious metal.
- Traders look to the US ADP report and ISM Manufacturing PMI for a fresh impetus.
Gold (XAU/USD) witnessed good two-way price swings on Tuesday and settled near the top end of its daily range, registering its biggest monthly percentage gain since August 2011. The subsequent move up during the Asian session on Wednesday pushed the commodity to a fresh all-time peak and is sponsored by a combination of factors. Concerns over the looming US government shutdown, along with rising geopolitical tensions and firming expectations for two more interest rate cuts by the Federal Reserve (Fed) this year, continue to act as a tailwind for the precious metal.
However, extremely overbought conditions might hold back the XAU/USD bulls from placing fresh bullish bets and warrant some caution before positioning for an extension of the recent well-established uptrend witnessed over the past month or so. Nevertheless, the supportive fundamental backdrop suggests that the path of least resistance for the Gold price is to the upside, and any corrective pullback could be seen as a buying opportunity. Traders now look to the US ADP report on private-sector employment and the US ISM Manufacturing PMI for a fresh impetus.
Daily Digest Market Movers: Gold remains supported by Fed rate cut bets and sustained safe-haven buying
- Gold has risen by an impressive 45% since the beginning of 2025 and recorded gains exceeding 11% in September as profound market uncertainty continues to drive investors globally to seek refuge in traditional safe-haven assets.
- A Republican spending bill failed to pass through the Senate on Tuesday, setting the stage for a partial government shutdown from midnight. A prolonged shutdown could have an adverse effect on economic performance.
- This could further encourage more easing from the US Federal Reserve, which, in turn, is seen driving flows towards the non-yielding yellow metal and contributing to the recent strong positive move to a fresh all-time high.
- According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 95% chance of an interest rate cut at the next FOMC meeting in October and an over 75% probability of another rate reduction in December.
- The expectations seem unaffected by hawkish comments from Dallas Fed President Lorie Logan, saying that anchored inflation expectations cannot be taken for granted and that he plans to exercise caution in further reductions.
- The US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of August stood at 7.22 million vs 7.2 million estimated.
- Russian officials said on Monday that a move to supply US Tomahawk cruise missiles to Ukraine, for strikes deep into its territory, could trigger a steep escalation. This keeps geopolitical risks in play and benefits the safe-haven bullion.
Gold bulls could pause for a breather before positioning for further gains amid overbought conditions
From a technical perspective, the overnight goodish rebound from sub-$3,800 levels and the subsequent move up validate the near-term positive outlook for the Gold price. That said, the daily Relative Strength Index (RSI) remains well above the 70 mark and points to extremely overbought conditions. This, in turn, makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move.
Meanwhile, any corrective slide below the $3,835 immediate support is more likely to attract some buying near the $3,816 area, representing a short-term ascending trend-line. Some follow-through selling, leading to a subsequent breakdown and acceptance below the $3,800 mark, could pave the way for deeper losses and drag the Gold price to the next relevant support near the $3,758-3.757 region. The downfall could extend further towards the $3,735 support before the XAU/USD eventually drops to the $3,700 round figure.
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.
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