Gold (XAU/USD) slipped below the $3,850 mark on Thursday, retreating from its recent all-time high near $3,895 as the US Dollar stages a recovery. At the time of writing, Gold is trading around $3,835, down approximately 0.80% on the day during the US session.
US Dollar Recovery Weighs on Gold, But Shutdown Keeps Safe-Haven Bid Intact
The correction in Gold comes as the US Dollar Index (DXY) rebounds from a one-week low, edging toward 98.00, supported by rising demand despite ongoing political uncertainty from the federal government shutdown.
Although the pullback in Gold is notable, the broader outlook remains constructive. The shutdown is delaying key economic data releases, reinforcing safe-haven interest in non-yielding assets like Gold. Additionally, expectations for a Federal Reserve rate cut later this month continue to support the metal.
Key economic releases, including Initial Jobless Claims and August Factory Orders, were postponed Thursday. The Bureau of Labor Statistics (BLS) also confirmed that Friday’s Nonfarm Payrolls (NFP) report is unlikely to be released due to the government shutdown.
Shutdown, Weak Data, and Fed Expectations Dominate Market Sentiment
- The Senate once again failed to pass a stopgap funding bill, making it almost certain that the government shutdown will persist into next week.
- The US Supreme Court ruled to block a motion to immediately remove Fed Governor Lisa Cook, preserving the central bank’s leadership and calming concerns about Fed independence.
- On trade, the Trump administration has postponed a proposed 100% tariff on pharmaceutical imports, easing fears of a spike in healthcare costs and inflation.
- Meanwhile, US private sector job data disappointed. ADP figures showed a loss of 32,000 jobs in September, well below forecasts of a 50,000 gain, with August data also revised sharply lower.
All of this contributes to market conviction that the Fed will cut interest rates to support the economy. According to the CME FedWatch Tool:
- The probability of a 25 bps rate cut in October is priced at 98.9%
- Odds of a December rate cut rose to 86.5%, up from 78% the day before
Technical Outlook: Dip-Buying Supports Gold Near $3,850
Despite the pullback, technical indicators suggest that bullish momentum remains intact.
- $3,850 is acting as immediate support, reinforced by the 21-period Simple Moving Average (SMA) on the 4-hour chart.
- Below that, the $3,800 psychological level offers strong support, backed by the 50-period SMA.
- The Relative Strength Index (RSI) remains elevated near 68, signaling strong buying interest.
- The Average Directional Index (ADX) has dipped to around 27, indicating that while trend strength is easing, the uptrend is still in play.
📈 Bottom line: As long as Gold holds above the $3,800–$3,850 support zone, the bias remains to the upside.
📌 Gold FAQs
Why is Gold considered a safe-haven asset?
Gold has historically been used as a store of value and is considered a hedge against inflation, economic uncertainty, and currency depreciation. It’s especially sought after during geopolitical turmoil or market stress.
Who are the biggest Gold buyers?
Central banks are the largest institutional buyers. In 2022, they added over 1,100 tonnes of Gold to their reserves, the highest on record. Emerging markets like China, India, and Turkey are leading the accumulation trend.
How does Gold interact with other assets?
Gold is inversely correlated with the US Dollar and Treasury yields. When the Dollar weakens or interest rates fall, Gold typically rises. It also tends to perform well when risk assets, like equities, sell off.
What drives Gold prices?
Gold prices react to a wide range of factors:
- Interest rates and inflation expectations
- Currency moves (especially USD)
- Geopolitical risk and global growth concerns
- Central bank demand and ETF flows