Gold (XAU/USD) extended its record-breaking rally above $3,900 on Monday, hitting fresh all-time highs as investors flocked to safe-haven assets amid the prolonged United States (US) government shutdown, growing political uncertainty in France and Japan, and rising bets on further Federal Reserve (Fed) rate cuts.
At the time of writing, XAU/USD is trading around $3,930, up 1.10% on the day after touching a new record of $3,949 earlier in the European session. The metal is on track for its eighth consecutive weekly gain, marking one of the strongest bull runs in recent history.
A weakening Japanese Yen (JPY), another traditional safe-haven asset, has added further fuel to gold’s momentum as Japan’s political transition unfolds. Overall, the outlook for bullion remains firmly bullish, supported by persistent geopolitical tensions, robust central bank purchases, and surging ETF inflows. Gold prices have already soared nearly 50% so far in 2025.
Market movers: US shutdown and political turmoil in France and Japan
The US government shutdown has entered its sixth day after negotiations over the weekend failed to produce a funding agreement, leaving major federal operations closed. The White House has warned of potential mass layoffs if the impasse continues, while the Senate struggles to reach the 60-vote threshold required to pass competing stopgap funding bills.
In Europe, French Prime Minister Sébastien Lecornu resigned on Monday, less than 24 hours after unveiling his new cabinet, following a failure to secure parliamentary confidence—further unsettling investors.
Meanwhile, in Japan, Sanae Takaichi’s election as leader of the ruling Liberal Democratic Party (LDP) positions her to become the country’s first female prime minister after a parliamentary confirmation on October 15. Markets interpreted her leadership as a signal for looser fiscal policy and less urgency to normalize monetary conditions, pressuring the Yen further.
As political uncertainty in France and Japan weighed on the Euro and Yen, the US Dollar (USD) regained traction. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, climbed to a two-week high around 98.35, capping gold’s upside momentum.
Fed rate cut bets underpin gold
Expectations for further Fed easing continue to buoy gold. According to the CME FedWatch Tool, markets are pricing in a 95% probability of a 25-basis-point (bps) rate cut at this month’s FOMC meeting and an 83.7% chance of another in December. The outlook for lower interest rates enhances gold’s appeal as a non-yielding asset.
The extended US government shutdown has delayed several key economic releases, forcing investors to rely on private-sector data and Fed communications for policy cues. All eyes are now on the Fed’s meeting minutes, due Wednesday, which could provide further insight into the central bank’s policy path heading into year-end.
Technical analysis: bulls eye the $4,000 mark
XAU/USD remains in consolidation mode after peaking near $3,949. The breakout above $3,900 reinforces the bullish structure, with buyers defending dips despite overbought technical signals.
The $3,900 level serves as immediate support, bolstered by the rising 21-period Simple Moving Average (SMA) near $3,879. A deeper pullback could find a floor at the 50-period SMA around $3,826. On the upside, a sustained break above $3,949 could open the door toward the psychological $4,000 threshold.
The Relative Strength Index (RSI) stands around 69, just below overbought territory, indicating the potential for short-term consolidation before another leg higher.
