Gold (XAU/USD) edged higher on Thursday after a modest pullback during the Asian session, rebounding from the $3,853–3,852 area and holding close to the record high set a day earlier. Despite overbought technical conditions, the precious metal remains well supported, with investors showing little concern over the partial US government shutdown. A broadly positive tone across equity markets has capped safe-haven demand, but macroeconomic and geopolitical drivers continue to favor gold in the near term.
Fed rate cut bets and weak data underpin gold
The disappointing US ADP employment report released Wednesday reinforced expectations that the Federal Reserve (Fed) will cut rates twice more before year-end. Private-sector payrolls fell by 32,000 in September, the steepest drop since March 2023, while August’s figures were revised down to show a decline instead of growth. The soft labor market outlook limits upside potential for the US Dollar (USD) and supports gold’s appeal as a non-yielding asset.
Meanwhile, the ISM manufacturing PMI ticked up to 49.1 from 48.7, slightly above forecasts. While this gave the USD a short-lived lift from a one-week low, dovish Fed expectations quickly reasserted themselves, keeping gold underpinned.
Geopolitical risks add to upside bias
According to the Wall Street Journal, the US will provide Ukraine with intelligence to aid long-range strikes on Russian energy infrastructure, a move backed by President Donald Trump and encouraged for NATO allies as well. This development has added to geopolitical risk sentiment, limiting the potential for any sustained pullback in gold prices.
Investors also remain cautious ahead of key US macro releases, particularly Friday’s Nonfarm Payrolls (NFP). However, the partial government shutdown could delay the release, leaving Fed officials’ speeches as the primary driver for USD flows and short-term moves in XAU/USD.
Technical outlook: consolidation before next leg higher
From a technical perspective, gold’s daily Relative Strength Index (RSI) remains in deeply overbought territory, tempering aggressive bullish positioning. Still, Tuesday’s rebound from below $3,800 validates the constructive near-term outlook. Traders may wait for consolidation or a modest dip before positioning for another extension of the recent uptrend.
Key support sits around $3,825–3,820, with a break below $3,800 exposing downside toward $3,758–3,757 and then $3,735, before a potential test of the $3,700 psychological level. On the topside, momentum above this week’s record peak could open the way for fresh all-time highs once the current overbought conditions ease.
