Gold continued its rally to fresh record highs above $4,200 on Wednesday, driven by renewed weakness in the US Dollar and growing expectations for deeper Federal Reserve rate cuts. Fed Chair Jerome Powell reinforced these expectations after emphasizing labor market concerns over inflation during a speech in Philadelphia.
At the time of writing, XAU/USD trades around $4,193, after earlier touching an all-time high of $4,218. This marks the fifth consecutive day of gains, as traders continue to favor gold amid a dovish Fed outlook and declining US yields.
Fed’s dovish tone fuels bullish momentum
Powell’s comments on Wednesday confirmed a notable shift in the Fed’s priorities. He acknowledged that the ongoing deterioration in employment conditions has become a greater concern than persistent inflation pressures. This stance has solidified market expectations for an interest rate cut in October and increased the likelihood of another move in December.
The softer tone has weighed on the US Dollar across the board, further boosting gold’s appeal as investors seek safe-haven assets amid growing uncertainty in the US economic outlook.
Technical analysis: overbought but no reversal in sight
XAU/USD has surged nearly 27% in less than two months—a remarkable rally that would typically warrant a short-term correction. Despite this, bearish attempts have remained limited so far, with no technical signs of a sustained reversal.
The 4-hour Relative Strength Index (RSI) continues to signal overbought conditions, suggesting the market could be vulnerable to pullbacks. However, the bullish trend remains firmly intact above $4,170, the previous all-time high recorded on Tuesday.
Above the $4,200 mark, immediate resistance is seen at $4,235 (the 172.2% Fibonacci extension of the October 1.14 rally), followed by $4,300 (the 161.8% Fibonacci extension). On the downside, initial support lies at $4,170, followed by $4,090 and the $4,050 zone, corresponding to the highs from October 8 and 9.
Gold’s momentum remains powerful, and while the rally appears stretched, a lack of bearish catalysts suggests that the precious metal could maintain its upward trajectory in the near term.
