Gold prolongs record-setting run amid amid economic risks, Fed rate cut bets

• Gold continues to attract safe-haven flows amid trade uncertainties and geopolitical tensions.
• Fed rate cut bets and the US government closure undermine the USD and remain supportive.
• The XAU/USD pair is showing no signs of bullish exhaustion despite overbought conditions.

Gold (XAU/USD) retests the all-time peak following a sharp Asian session slide to the $4,280-4,279 region and remains on track to end in the green for the ninth straight week. Against the backdrop of persistent geopolitical uncertainties, concerns about US-China trade tensions, and a prolonged US government shutdown, temper investors’ appetite for riskier assets. This, along with dovish Federal Reserve (Fed) expectations, has been a key factor behind the non-yielding yellow metal’s recent upsurge.

In fact, traders seem to have fully priced in two more rate cuts by the US central bank in October and December. This continues to exert downward pressure on the US Dollar (USD) for the fourth successive day and further benefits the Gold. Meanwhile, the supportive fundamental backdrop offsets extremely overbought conditions. Moreover, the emergence of dip-buyers on Friday suggests that the path of least resistance for the XAU/USD pair is to the upside and backs the case for further gains.

Daily Digest Market Movers: Gold continues to be underpinned by safe-haven buying, dovish Fed

• US-China trade tensions escalated in recent weeks after US President Donald Trump’s threat to raise tariffs on Chinese goods to 100% in retaliation for the latter’s enhanced restrictions on the export of rare earths. Moreover, both countries announced the tit-for-tat port fees on vessels linked to each other’s fleets, fueling concerns about an all-out trade war.
• Adding to this, concerns that a prolonged US government shutdown would affect the economic performance, assisted the safe-haven Gold to extend its recent record-setting run. The US Senate rejected a House Republicans’ short-term funding bill, aimed to end the government closure, for the tenth time on Thursday, underscoring a deadlock in Congress.
• On the geopolitical front, Russia launched hundreds of drones and dozens of missiles, as well as glide bombs on Thursday, hitting gas facilities in eastern Ukraine. Meanwhile, US President Donald Trump said that he will meet Russian President Vladimir Putin in Budapest, Hungary, to work toward ending the three-and-a-half-year war in Ukraine.
• US Federal Reserve Chair Jerome Powell struck a dovish tone earlier this week, saying that the labor market remained mired in its low-hiring, low-firing doldrums through September. Moreover, Fed Governor Christopher Waller noted on Thursday that inflation remains on its path to the central bank’s 2% target and is not a barrier to interest rate cuts.
• Separately, Minneapolis Fed President Neel Kashkari said that the US job market was slowing down, and it was too soon to know the effect of tariffs on inflation. Nevertheless, traders now seem to have fully priced in a 25-basis-point rate cut at each of the October and December meetings, which continues exerting downward pressure on the US Dollar.

Gold uptrend remains uninterrupted as bulls shrug off extremely overbought conditions

The daily Relative Strength Index (RSI) remains well above the 70 mark. This might prompt the XAU/USD bulls to take some profits off the table and trigger a sharp retracement slide. That said, any corrective fall below the $4,300 mark might continue to find some support near the Asian session low, around the $4,280-4,279 region. However, some follow-through selling could drag the Gold price towards the $4,235-$4,230 region en route to the overnight trough, around the $4,200 mark. The latter should act as a key pivotal point, which, if broken decisively, should pave the way for deeper losses.

On the flip side, momentum beyond the $4,379-4,380 region, or the Asian session high, could extend towards conquering the $4,400 round figure. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and assist the Gold price to prolong its recent well-established uptrend witnessed over the past two months or so.