Gold (XAU/USD) continued its historic rally during Wednesday’s Asian session, climbing further above the $4,000 psychological level. The move was fueled by rising economic uncertainty linked to the ongoing US government shutdown and growing expectations for additional interest rate cuts from the Federal Reserve (Fed). Persistent geopolitical risks, solid central bank demand, and softening global risk sentiment have also reinforced the metal’s bullish momentum.
Safe-haven demand dominates despite stronger USD
Despite a broadly firmer US dollar—which typically weighs on gold—investors continue to seek the safety of the non-yielding asset. The appeal of bullion has been further strengthened by concerns over global trade, geopolitical tensions, and the potential economic fallout from Washington’s budget impasse. Even with short-term charts showing overbought conditions, the bullish sentiment surrounding gold remains intact, with traders viewing dips as fresh buying opportunities.
Fundamentals underpin the rally
The prolonged US government shutdown, now in its second week, has raised concerns over fiscal stability, while markets have largely priced in further Fed rate cuts—25 basis points each in October and December. This dovish outlook has bolstered the case for holding gold as a hedge against policy uncertainty and lower real yields.
According to the World Gold Council, global investments in bullion-backed exchange-traded funds (ETFs) have surged to a record $64 billion so far this year, with September marking the strongest monthly inflows in over three years. Central banks have also been net buyers, adding a combined 15 tonnes to reserves in August, led by the National Bank of Kazakhstan.
Technical outlook: breakout above $4,000 confirms bullish momentum
Wednesday’s decisive move beyond $4,000 confirms a breakout above the ascending channel formed since mid-September, signaling further upside potential. Immediate support is seen near $3,975, followed by $3,948–3,947, while stronger demand is likely to emerge around $3,900 if a deeper pullback occurs.
Looking ahead, attention turns to the release of the FOMC Minutes later today and Fed Chair Jerome Powell’s comments on Thursday for additional cues on the Fed’s rate-cut trajectory—factors that could set the next directional move for XAU/USD.
