Phnom Penh—Gold (XAU/USD) is struggling to find firm footing above the key $4,200 mark heading into the European session on Friday, despite a surge fueled by a depressed US Dollar (USD) and a persistent risk-off market mood driven by renewed concerns over the US economic outlook.
The precious metal’s recent bullish breakout through the $4,150 resistance barrier, followed by a brief move past the $4,200 round figure, was initially seen as a significant technical trigger. Moreover, oscillators on the daily and four-hour charts are reflecting positive momentum, suggesting the path of least resistance for Gold remains to the upside. Should the commodity clear the overnight swing high near $4,245, the bulls are poised to aim for the next major psychological target at $4,300.
However, this upward trajectory faces immediate resistance from a cautious turn in rhetoric among Federal Reserve policymakers. Citing a lack of complete economic data due to the recent government shutdown, several officials have signaled hesitation regarding further monetary easing. This caution has prompted traders to trim their expectations for a rate cut in December, injecting uncertainty into the market and forcing Gold to surrender a major portion of its modest intraday gains.
Economic Concerns and Rate Cut Bets
Underpinning Gold’s demand is the market consensus that the prolonged US government closure has severely impacted the economy, with economists estimating a potential shave of 1.5% to 2.0% off quarterly GDP growth. This expected weakness is keeping the USD depressed near a two-week low, which, combined with general market weakness, enhances the appeal of the non-yielding safe-haven metal.
Conversely, the reopening of the US government has redirected focus back to the fiscal outlook. Cautious statements from Fed officials, including Minneapolis Fed President Neel Kashkari and Boston Fed President Susan Collins, underscore the data-dependent nature of policy. Collins specifically noted that she would be “hesitant to ease policy further” given the limited inflation information.
According to the CME Group’s FedWatch Tool, the probability of a 25-basis-point rate cut in December has been reduced to approximately 50%. However, the probability of a rate reduction in January remains higher, standing at over 75%, a factor still favoring XAU/USD bulls.
Technical Levels to Watch
On the downside, the overnight swing low around $4,145 now acts as the immediate floor. A decisive breach of this level could accelerate a fall toward $4,100, potentially exposing the critical psychological support at $4,000. A break below this $4,000 mark would be seen as a significant shift, favoring bearish traders in the near-term bias.
Traders are expected to continue scrutinizing comments from influential Federal Open Market Committee (FOMC) members throughout the day for clarity on the Fed’s rate-cut trajectory, which will ultimately dictate the USD’s demand and the short-term direction of the yellow metal.