Gold price rally extends for the third consecutive trading session in the week, hitting a record high of $4,056 a troy ounce, up over 1.70% on the day. Geopolitical uncertainty about the US government shutdown and expectations of lower US interest rates sustains flows into the yellow metal, which is up 54% year to date.
Bullion extends three-day rally
The lack of economic data releases due to the US government being closed keeps traders leaning on speeches by Federal Reserve (Fed) officials as the US government entered its eighth day of shutdown.
The St. Louis Fed’s Alberto Musalem and Fed Governor Michael Barr failed to deliver market moving remarks as they refused to talk about monetary policy and the economic outlook. Later, speeches by the Minneapolis Fed’s Neel Kashkari, the Dallas Fed’s Lorie Logan and Barr once more are awaited. These will arrive alongside the release of the last Meeting Minutes of the Federal Open Market Committee (FOMC).
Geopolitics is also playing its role, yet hopes of ending the Israel-Gaza war have increased as negotiations continued in Egypt. Hostilities between Russia and Ukraine continue apace.
Daily digest market movers: Gold aims higher as US yields slide
- Gold rallies despite the ongoing strength of the Greenback. The US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of six currencies, is up 0.45% at 99.00.
- US Treasury yields retreat as the 10-year Treasury note is down one-and-a-half basis points at 4.113%. US real yields — which correlate inversely to Gold prices — are also down nearly one bps at 1.763%.
- Global Gold ETFs have attracted $64 billion in inflows so far this year, according to data from the World Gold Council. September alone saw a record $17.3 billion, underscoring robust investor demand for the precious metal.
- Goldman Sachs revised it 2026 forecast for Gold prices from $4,300 to $4,900, citing strong flows into Gold ETFs and central bank demand. The People’s Bank of China (PBoC) added Bullion to its reserves in September for the eleventh straight month.
- Money markets indicate that the Fed will cut interest rates by 25 basis points (bps) at the upcoming October 29 meeting. The odds stand at 94%, according to the Prime Market Terminal interest rate probability tool.
Technical outlook: Gold price surges past $4,000, eyes on $4,100
Gold’s rally is set to extend past the current all-time high of $4,059 even though the Relative Strength Index (RSI) remains in overbought territory. The RSI is still shy of reaching the 90 level, the most extreme among ongoing strong trends.
If Gold clears $4,100, the next resistance would be $4,150, followed by $4,200. Conversely, XAU/USD first support would be $4,000. A breach of the latter will expose the October 7 daily low of $3,941, ahead of reaching the monthly low of $3,819.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.