Gold (XAU/USD) extended its rally for a third consecutive session on Thursday, climbing to a three-week high during early European trading. The bullish momentum was fuelled by growing expectations that the US Federal Reserve could cut interest rates in December, as delayed economic data is expected to reflect further weakness amid the ongoing US government shutdown.
The non-yielding yellow metal also gained from a broad sell-off in the US Dollar (USD), helping gold prices sustain their upside momentum despite an improving risk sentiment after a deal was passed to reopen the US government.
Gold rises as traders bet on dovish Fed
Investors are increasingly betting that the Fed will adopt a more accommodative stance in the coming months, a factor that continues to support gold. Market participants have priced in nearly a 60% probability of a 25-basis-point rate cut at the upcoming December FOMC meeting, according to CME FedWatch data.
The softer US Dollar has further amplified demand for gold. Analysts note that even though the reopening of the US government has boosted investor confidence, attention has shifted back to the country’s weak fiscal outlook and the risk of slowing growth.
Economists estimate that the prolonged government closure could shave off 1.5–2.0% from quarterly GDP growth. Labour market data also indicates strain — workforce analytics firm Revelio Labs reported that 9,100 jobs were lost in October, while government payrolls fell by 22,200 positions.
Analysts eye $4,250 as next key resistance
Technically, gold has broken through the $4,200 resistance level, confirming bullish control in the short term. The metal has also found acceptance above the 61.8% Fibonacci retracement level of the recent correction from October’s all-time highs.
Analysts expect prices to test the next intermediate barrier around $4,250–$4,255, with further upside potential toward $4,285 and $4,300 if momentum persists.
Conversely, a dip below $4,180 could trigger mild profit-taking, though the $4,100–$4,095 zone remains a key support area. A breakdown below $4,000 would be required to signal a reversal of the current bullish trend.
Broader market outlook
Atlanta Fed President Raphael Bostic remarked on Wednesday that while the job market remains “in a curious state of balance,” he does not expect a severe downturn soon. However, he acknowledged limited inflationary pressure, suggesting that lower policy rates may not necessarily “feed the inflation beast.”
Traders are closely watching speeches from several FOMC members this week for additional signals on the Fed’s rate trajectory.
Despite improving global risk sentiment, the fundamental backdrop for gold remains supportive, given falling Treasury yields, weak labour data, and the potential for further monetary easing. Analysts say that as long as the USD remains under pressure, the path of least resistance for gold continues to be upward.