Gold (XAU/USD) extended its winning streak on Thursday, marking its fourth consecutive daily advance and touching a new three-week high during early European trading.
The metal remains well-supported by expectations of further Federal Reserve (Fed) rate cuts in December amid growing signs of a softening US economy following the prolonged government shutdown.
Fed rate cut expectations fuel gold rally
Investor sentiment continues to favor the non-yielding metal as markets price in around a 60% probability of a 25-basis-point Fed rate cut at next month’s FOMC meeting.
Traders expect delayed US macro data to reveal further economic weakness, reinforcing the case for lower borrowing costs. The dovish outlook has kept the US dollar (USD) on the defensive, providing a tailwind for gold.
However, a modest recovery in the greenback and a generally positive risk tone—driven by optimism over the reopening of the US government—are capping gold’s upside in the near term. Despite this, market consensus suggests that any corrective dips are likely to attract renewed buying interest, with the broader trend still pointing higher.
Mixed sentiment as US government reopens
The US Senate’s approval of the funding bill to end the 43-day government shutdown boosted market confidence, tempering safe-haven demand for gold. Nonetheless, economists warn that the prolonged closure may have shaved 1.5–2.0% off quarterly GDP growth, raising fresh fiscal and labor concerns.
Labor data released by Revelio Labs indicated a loss of 9,100 jobs in October, while government payrolls fell by 22,200. Similarly, the Chicago Fed noted a marginal uptick in unemployment, signaling weakening labor conditions.
While Atlanta Fed President Raphael Bostic acknowledged a “curious state of balance” in the labor market, he downplayed the risk of a sharp downturn. Still, his comments suggested limited tolerance for inflation risks, leaving room for the Fed to maintain a dovish bias should growth continue to falter.
Technical outlook: bulls eye $4,250–$4,255 next
From a technical standpoint, gold has secured a foothold above the 61.8% Fibonacci retracement of its recent decline from October’s all-time high, as well as the $4,200 psychological level. Momentum indicators on both the daily and 4-hour charts reinforce a constructive outlook, with potential for a continued climb toward the $4,250–$4,255 resistance zone, followed by $4,285 and $4,300.
On the downside, initial support is seen around $4,180, with stronger demand expected near $4,100–$4,095. A decisive break below that range could expose the $4,075 area and the 38.2% Fibonacci retracement near $4,025, while a drop below $4,000 would signal a shift toward a bearish short-term bias.
Overall, the fundamental and technical backdrop continues to favor upside potential for gold as long as Fed easing expectations remain intact and US macro data show further signs of economic cooling.
