Gold (XAU/USD) continues its powerful ascent, crossing the $3,900 mark during Monday’s Asian session and hitting a fresh record high. The rally is driven by growing expectations of additional interest rate cuts by the US Federal Reserve (Fed) and rising demand for safe-haven assets as the US government shutdown drags on. Meanwhile, Japan’s political shift also supports the non-yielding metal after fiscal dove Sanae Takaichi was elected as the new Prime Minister, raising expectations that the Bank of Japan (BoJ) will delay further rate hikes.
Fundamental Overview: Multiple Tailwinds Boost Gold
Gold’s sustained bullish momentum is fueled by a blend of economic and geopolitical factors. The CME FedWatch Tool shows markets pricing in a 95% chance of a 25-basis-point Fed rate cut in October and an 83% chance of another in December, reinforcing the bullish tone for the metal.
The ongoing US government shutdown adds further uncertainty, as prolonged political gridlock could lead to federal layoffs and delay key economic data releases, including September’s jobs report. These factors enhance gold’s appeal as a safe-haven asset.
At the same time, Japan’s leadership change supports the metal, with expectations of looser monetary policy from the BoJ. The prospect of prolonged ultra-easy policy weakens the Japanese Yen, strengthening the US Dollar (USD) but also indirectly supporting Gold due to renewed interest in hedging inflation and policy uncertainty.
Geopolitical risks further fuel demand for Gold. Russia’s weekend missile and drone attacks on Ukraine, coupled with renewed tensions in Gaza, keep investors cautious and sustain strong safe-haven inflows.
Market Dynamics and Technical Outlook
Technically, Gold’s breakout above the $3,900 psychological level reinforces the bullish bias. However, the Relative Strength Index (RSI) remains above 70, indicating overbought conditions. This suggests that while the broader trend stays positive, short-term traders should be cautious of potential pullbacks.
Immediate support lies near the $3,900–$3,895 zone, followed by $3,865–$3,863, where the 100-hour Simple Moving Average (SMA) aligns with a rising trendline from last week’s lows. Any dip toward these levels could attract fresh buying interest.
On the upside, a sustained move beyond $3,910–$3,920 could open the door for a rally toward the $3,950 handle, marking the next potential resistance zone for the bulls.
Outlook: Bulls in Command
With a dovish Fed outlook, persistent geopolitical uncertainty, and a fragile US fiscal situation, the fundamental backdrop continues to favor Gold buyers. While near-term corrections cannot be ruled out, the overall trajectory for XAU/USD remains firmly upward, suggesting that any dip could serve as a renewed buying opportunity.
