Gold (XAU/USD) edged higher during early European trading on Monday, attracting renewed buying interest after briefly retreating from its record peak reached on Friday. The precious metal remains supported by dovish Federal Reserve (Fed) expectations, ongoing geopolitical tensions, and concerns that a prolonged US government shutdown could weigh on economic growth.
Market participants have fully priced in two additional rate cuts by the Fed before year-end, according to the CME FedWatch Tool, keeping the US Dollar (USD) under pressure and bolstering the appeal of the non-yielding yellow metal. Broader demand factors such as central bank purchases, fiscal uncertainty, and robust ETF inflows continue to provide a supportive backdrop for gold prices.
US President Donald Trump’s remarks late last week helped calm fears of a full-scale US-China trade war, limiting gold’s upside momentum. Trump stated that comprehensive tariffs on China would be “unsustainable” and confirmed that a meeting with Chinese President Xi Jinping remains on track. The comments encouraged some profit-taking, though the corrective pullback has so far lacked strong follow-through.
Market drivers: Geopolitical risks and fiscal concerns underpin safe-haven demand
Gold’s safe-haven appeal remains underpinned by rising geopolitical risks and fiscal uncertainty. Reports on Monday indicated that Ukrainian drones struck a Gazprom gas processing plant in southern Russia and separately targeted the Novokuibyshevsk oil refinery in the Samara region, escalating concerns over further tensions in the Russia-Ukraine conflict.
Meanwhile, the US government shutdown has extended into its 20th day, with lawmakers still deadlocked over funding and healthcare subsidies. The Senate is expected to hold its 11th vote on a stopgap funding bill later today, though political gridlock shows few signs of easing. Market participants fear that a prolonged shutdown could begin to impact economic performance and investor confidence.
With Fed officials now in a pre-meeting blackout period, traders are likely to shift focus toward Friday’s US Consumer Price Index (CPI) data, which could provide fresh clues on the central bank’s policy trajectory.
Technical outlook: Gold holds key support near $4,200
From a technical perspective, XAU/USD found strong support near the $4,210–$4,200 zone on Friday — an area defined by the 100-hour Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the recent rally from October 9 to 17.
A sustained move above the $4,275 level, corresponding to the 23.6% Fibonacci retracement, could open the door for a test of the $4,300 mark, followed by resistance around $4,325. A decisive break above this region could extend the rally toward $4,379–$4,380, revisiting the all-time high.
On the downside, immediate support lies near $4,219–$4,218, followed by $4,200 and $4,186. A clear drop below $4,163–$4,162 — the 50% retracement level — could expose gold to deeper losses toward $4,100, aligned with the 61.8% Fibonacci retracement. A sustained break below this zone would signal a potential top formation and a shift toward a more corrective phase.
