gold prices have begun to attract investor interest amid rising apprehensions about a potential US government shutdown. As the deadline approaches, safety-seeking behaviors have sparked a renewed interest in precious metals, pushing gold (XAU/USD) back towards the $2,600 level during Friday’s Asian trading session. The backdrop of ongoing geopolitical tensions, trade war uncertainties, and a hawkish shift from the Federal Reserve has further amplified this trend, with investors looking for secure assets.
The current wave of investment into gold has also coincided with a slight decline in US Treasury bond yields, which have helped temper the recent surge of the US Dollar to a two-year high. However, projections from the Federal Reserve indicating a slowdown in rate cuts through 2025 are likely to continue supporting bond yields and the dollar, creating headwinds for the non-yielding gold .
Despite the gold price finding support from the influx of haven flows, bullish sentiment appears muted due to the Fed’s firm stance. The failure of the U.S. House of Representatives to pass a spending bill adds to the uncertainty surrounding a potential government shutdown, magnifying investor concerns as trade tensions also loom.
Economic data has shown mixed signals that complicate the outlook. The U.S. economy experienced a 3.1% annualized growth rate in the last quarter, outpacing earlier estimates, while unemployment claims fell more than anticipated, reinforcing the Fed’s outlook moving forward. This environment leaves investors hesitant to make bold moves until the release of the US Personal Consumption Expenditure (PCE) Price Index, which could provide further insights into inflation.
From a technical standpoint, gold ’s recent slump below its 100-day Simple Moving Average has indicated increased bearish sentiment. Key resistance may arise around the $2,626 level, while a strong upward move could trigger further buying. Conversely, support is noted at the monthly low near $2,583, with potential drops to the $2,560 area and below, suggesting a challenging environment for gold prices unless a significant shift occurs.
