Key Takeaways
- Gold (XAU/USD) has fallen for the fourth consecutive day, reaching a more than one-week low, influenced by reduced expectations for a December Federal Reserve interest rate cut.
- The ongoing US government shutdown is impacting economic momentum and creating uncertainty, which paradoxically offers some support to the safe-haven asset gold.
- Traders are awaiting key economic data releases, including the FOMC Minutes and Nonfarm Payrolls, which could provide further direction for gold prices.
- Technical analysis suggests that gold must hold above the $4,000 psychological level to prevent further declines, with immediate resistance around $4,053-$4,055.
- Geopolitical tensions, including recent reports from Russia, are also providing underlying support for gold as a safe-haven asset.
Gold Prices Extend Downtrend Amid Shifting Fed Rate Cut Expectations
Gold (XAU/USD) has continued its downward trajectory for the fourth consecutive trading session, marking a new low not seen in over a week. Despite this decline, the precious metal managed to hold above the significant $4,000 psychological level during the Asian trading session.
Market participants are increasingly scaling back their expectations for another interest rate cut by the US Federal Reserve (Fed) in December. This shift in sentiment is a primary driver behind the recent weakness observed in the non-yielding yellow metal.
Simultaneously, the US Dollar (USD) is facing challenges in attracting sustained buying interest. Concerns over slowing economic momentum, exacerbated by the extended US government shutdown, are contributing to this weakness.
💡 The prevailing risk-off environment, fueled by economic uncertainties, is providing some buffer for gold, a traditional safe-haven asset, by limiting its losses.
Traders are also adopting a cautious approach ahead of crucial economic events later in the week, including the release of the FOMC Minutes and the delayed US Nonfarm Payrolls (NFP) data.
Market Movers: Gold Bears Maintain Grip as Fed Rate Cut Bets Diminish
The prolonged US government shutdown has led to a lack of official economic data, further dampening expectations for a Federal Reserve interest rate cut in December. Additionally, several Fed officials have recently expressed caution regarding further policy easing, reinforcing this sentiment.
Fed Vice Chair Philip Jefferson indicated on Monday that while upside risks to inflation have somewhat decreased and the current policy rate is slightly restrictive, the central bank must proceed cautiously as monetary policy approaches the neutral rate.
📊 According to CME Group’s FedWatch Tool, the probability of a 25 basis-point Fed rate cut in December has now fallen below 50%. This reduction in anticipated rate cuts has been a significant factor contributing to the outflow of capital from gold for the fourth day in a row.
Meanwhile, investor anxieties regarding the impact of the ongoing government closure on the US economy are preventing the US Dollar from building on its previous gains. This situation may discourage gold bears from placing aggressive bets, thereby limiting further price depreciation for XAU/USD.
📍 With the US government expected to reopen, market focus is set to shift back to the delayed economic data releases. The key Nonfarm Payrolls (NFP) report, scheduled for Thursday, will be closely watched. Furthermore, the FOMC Minutes are anticipated to provide valuable insights into the Fed’s future rate-cut trajectory, potentially influencing the commodity’s price movements.
⚡ Geopolitical tensions remain in play, with reports indicating Russian forces occupying strongholds in the Dnipropetrovsk region and a Russian attack prompting the evacuation of a Romanian border village. These developments could offer continued support to gold as a safe-haven asset.
Gold Price Analysis: $4,000 Level Crucial for Bearish Momentum
The XAU/USD pair recently encountered resistance at the 200-hour Exponential Moving Average (EMA), failing to push back above it. This technical indicator suggests that the path of least resistance for the gold price remains to the downside.
🐻 A sustained break below the $4,000 psychological mark would reinforce the negative outlook, potentially making the commodity vulnerable to a more accelerated decline. Initial support targets would then be the $3,931 intermediate level, followed by the $3,900 figure and the late October swing low around the $3,886 region.
On the other hand, any significant recovery attempt may face initial strong resistance in the vicinity of the $4,053-$4,055 area. However, a decisive move above this level could trigger short-covering and lift the gold price back towards the 200-hour EMA, currently positioned just below the $4,100 mark.
📈 A follow-through in buying interest above this resistance would suggest that the recent decline observed over the past week, originating from the mid-$4,200s, may have concluded. This could pave the way for additional upward price movement.
Expert Summary
Gold remains under pressure due to reduced expectations of a Fed rate cut and consolidated US Dollar strength. However, ongoing economic uncertainty and geopolitical risks provide a floor, with the $4,000 level acting as a critical support zone.
Traders are closely monitoring upcoming economic data and Fed minutes for clearer direction, while technical levels around $4,050 and $4,100 present key resistance points on any potential recovery.
