- Gold price marks fresh record highs above $3,900 amid geopolitics and the US government shutdown.
- Fed’s easing stance and institutional buying keep the bullion supported, with yearly targets around $4,200.
- Technically overbought gold could pull back before resuming the uptrend.
Gold price broke above the $3,900 level on Monday, marking fresh all-time highs around $3,950, reflecting investor demand for a safe-haven asset amid political turmoil and expectations of two more rate cuts by the Fed in 2025.
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The US government shutdown remains a major driver as funding negotiations have stalled, and senior White House officials warned of a massive layoff of federal employees if talks fail to progress. The uncertainty has fueled the appetite for gold as markets seek refuge in the bullion to hedge against the risk. According to Ross Norman, the major strength in gold comes from structural demand rather than FOMO buying.
A weaker US labor outlook adds to the bullish case, as in the absence of NFP release, alternate data sources reinforce the odds of Fed easing. Markets now price in a 25 bps rate cut in October and another one in December. UBS analysts project gold’s upside target to $4,200 by year’s end due to both momentum and fundamentals.
The inflow to gold-backed ETFs and sustained central bank buying, combined with a weaker dollar, support the gold rally. Norman argues that the precious metal’s bullishness is more supported by institutional long-term buying than speculative positions, suggesting that gold’s dips could be opportunities to buy rather than signs of a trend reversal.
Geopolitics also remains favorable for gold as France has recently plunged into a crisis following the resignation of Prime Minister Sébastien Lecornu, driving risk into Europe. Meanwhile, Japan’s recently elected pro-spending leader Sanae Takaichi has hammered the yen, boosting cross-market support for commodities.
Gold is likely to retain its bullish bias unless the US government shutdown ends and the Fed pivots to a hawkish stance. The magnitude of its upside could slow down as positioning could become crowded. Still, the central bank buying and diversifying away from the US dollar makes it hard to find a bearish reversal in gold.
Gold Price Technical Analysis: Potential Pullback Before Upside
The 4-hour chart for gold reveals an overbought scenario as the RSI stands above 70.0 while the current price remains well above the key moving averages. Increased distance from the 20-period MA and overbought RSI point at consolidation around current levels before resuming the uptrend.
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The immediate support emerges at the 20-period MA near $3,885, ahead of the swing low and 100-period MA confluence at $3,820. On the upside, the key attraction for buyers stays at $4,000, with a sustained breakout leading to $4,100.
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