Gold (XAU/USD) extended its rally on Friday, rising 0.64% during the North American session as the prolonged US government shutdown and deteriorating economic sentiment drove investors toward safe-haven assets. At the time of writing, bullion trades around $4,002 after rebounding from an intraday low of $3,974.
Bullion climbs amid risk aversion and rising Fed rate cut bets
Growing uncertainty over the US economy continues to underpin gold prices. The University of Michigan’s preliminary Consumer Sentiment Index for November dropped to its lowest level since June 2022, reflecting heightened household anxiety over the economic fallout from the government shutdown.
The pessimistic reading reinforced gold’s appeal as a hedge against uncertainty and potential monetary easing, with bullion up 0.13% for the week so far.
Labor market data added to the caution. The latest Challenger report showed that US employers announced over 150,000 layoffs in October the sharpest reduction for that month in more than two decades fueling speculation that the labor market is weakening faster than expected. According to Prime Market Terminal data, traders now assign a 68% probability of a Federal Reserve rate cut in December, further supporting gold’s upward momentum.
Daily market movers: gold gains despite steady Treasury yields
The US Dollar Index (DXY) slipped 0.15% to 99.55, while US Treasury yields stabilized after Thursday’s sharp drop. The 10-year Treasury yield hovered near 4.085%, and real yields—typically inverse to gold prices—rose slightly to 1.805%.
The US government shutdown has now entered its 38th day, with little sign of progress. Senate Republican Leader John Thune proposed a short-term resolution to reopen the government through January, though its passage remains uncertain. White House Economic Adviser Kevin Hassett acknowledged the growing toll on the economy, warning that the shutdown could shave between 1% and 1.5% off GDP growth this quarter.
On the inflation front, the New York Fed’s October survey showed one-year inflation expectations slipping to 3.2%, with the three- and five-year outlooks steady at 3.0%. Meanwhile, the University of Michigan reported a drop in consumer sentiment to 50.3 in November from 53.6 in October, alongside a rise in one-year inflation expectations to 4.7%.
Fed Vice Chair Philip Jefferson reiterated that the central bank should proceed cautiously with further rate cuts as policy nears a neutral stance, citing “the potential lack of government data due to the shutdown” as a reason for prudence.
Data from the World Gold Council (WGC) also pointed to strengthening physical demand. Gold-backed ETFs saw net inflows of 54.9 tonnes in October, driven by strong buying in North America (+47.2 tonnes) and Asia (+44.8 tonnes), while Europe recorded outflows of 37.4 tonnes.
Technical outlook: gold eyes $4,100 if bulls secure a close above $4,000
From a technical standpoint, gold remains in bullish territory, with momentum improving as reflected in the relative strength index (RSI). A sustained close above the psychological $4,000 level would reinforce bullish sentiment and open the path toward the 20-day simple moving average (SMA) at $4,082, followed by $4,100.
Conversely, failure to hold above $4,000 could trigger a corrective move toward $3,950, with the next key support at the October 28 low of $3,886.
