Gold (XAU/USD) surged to new all-time highs on Wednesday, breaking decisively above the $4,000 mark for the first time as investors sought safety amid mounting global uncertainty and a dovish outlook from the Federal Reserve (Fed).
At the time of writing, XAU/USD trades near $4,037, extending this week’s gains to over 4% and pushing further into uncharted territory.
The latest leg higher comes despite a stronger US Dollar (USD), as political turbulence in France and Japan fuels safe-haven demand, prompting flows into both the Greenback and Gold. Meanwhile, the prolonged US government shutdown continues to unsettle markets, adding to the metal’s appeal as a hedge against political and economic instability.
Safe-haven demand and central bank buying underpin rally
Persistent geopolitical risks — including the Russia-Ukraine war, ongoing Middle East tensions, and concerns over global trade disruptions — have bolstered Gold’s role as a preferred safe-haven asset.
In addition, steady central bank purchases and robust inflows into Gold-backed exchange-traded funds (ETFs) are reinforcing the metal’s record-breaking momentum.
Consultancy Metals Focus estimates that global central bank Gold purchases will total around 1,000 metric tons in 2025, marking the fourth consecutive year of large-scale accumulation as monetary authorities diversify reserves away from USD assets.
US political gridlock deepens economic uncertainty
The US government shutdown has now entered its second week, with no progress toward a resolution. Democrats continue to block the ruling Republican Senate’s attempt to reopen federal agencies without extending expiring healthcare subsidies.
The deadlock is delaying critical economic data releases, complicating the Fed’s policy outlook, and raising the risk of broader economic disruptions. Market sentiment has also been rattled by President Donald Trump’s threat of large-scale federal layoffs, further amplifying investor anxiety.
Market focus turns to Fed minutes
The US Dollar Index (DXY) continues to advance for a third straight session, climbing to its highest level since August at around 98.83, as political instability in Europe and Asia drives investors out of the Euro and Yen. Meanwhile, US Treasury yields remain subdued across the curve as markets price in a faster pace of monetary easing.
According to Deutsche Bank, traders now expect roughly 111 basis points of rate cuts by December 2026. The CME FedWatch Tool shows markets are assigning a 94.6% probability of a 25-basis-point rate cut at the Fed’s October 29–30 FOMC meeting. With few key economic data releases this week, traders are focusing on the release of the September Fed Meeting Minutes later on Wednesday for further insight into policymakers’ recent “risk-management” decision.
Technical outlook: stretched but bullish trend intact
Gold’s powerful uptrend remains firmly intact, though momentum indicators suggest the rally is becoming overstretched.
The monthly Relative Strength Index (RSI) has surged above 90 — a level not seen since the 1980s — highlighting the risk of a near-term correction. On shorter time frames, the 4-hour RSI remains elevated near 76, signaling overbought conditions that could lead to profit-taking or short-term consolidation.
Immediate support lies at the 9-period Simple Moving Average (SMA) around the $4,000 level, followed by the 21-period SMA as a secondary cushion. On the upside, resistance is seen near $4,050, with further barriers expected around $4,100, where selling pressure may intensify as traders lock in gains.
