XAU/USD: Price Analysis and Forecast. Gold Continues to Strengthen Amid Favorable Fundamental Backdrop

[Ben Graham]

Buyers fully absorbed Thursday's modest correction, reversing the previous pullback and resuming the upward trend.

Persistent uncertainty surrounding global trade, rising geopolitical risks, and growing concerns over the prolonged U.S. government shutdown—which may impact key economic indicators—are all providing a bullish foundation for gold. Additionally, market participants have fully priced in two rate cuts by the Federal Reserve this year, which has limited the U.S. dollar's ability to capitalize on Friday's modest gains. This, along with global fiscal concerns, central bank gold purchases, and strong inflows into gold-backed ETFs, continues to support the metal's rally.

On Friday, U.S. President Donald Trump tried to ease concerns over the threat of an all-out trade war between China and the U.S., which temporarily capped gold's upside and triggered some mild profit-taking into the weekend. However, the correction was shallow and lacked follow-through.

Investors remain wary of broader economic risks, driven by increased geopolitical tensions and the ongoing government shutdown. Equally important are concerns about fiscal discipline and the rapidly expanding national debt, particularly in the U.S.—factors which continue to fuel demand for gold as a risk-hedging tool.

Geopolitical tensions have escalated further, with Ukrainian drones striking a Gazprom gas processing facility in southern Russia and a separate attack targeting a Russian oil refinery in the Samara region near Orenburg. These developments amplify the risk of further escalation in the Russia–Ukraine conflict.

Domestically, the political situation in the U.S. remains tense as well. The federal government shutdown has entered its third week, with Republicans and Democrats clashing over healthcare funding.

According to the CME Group's FedWatch Tool, markets now fully price in consecutive 25 basis point rate cuts at both the October and December Federal Reserve meetings. These expectations are limiting U.S. dollar recovery and providing additional support for gold.

Given the upcoming FOMC meeting and Friday's U.S. inflation data, it may be prudent to refrain from entering active positions in the near term.

Technical Outlook

From a technical standpoint, the XAU/USD pair has shown resilience below the $4,240 level. However, the rally encountered resistance near the historic high at approximately $4,380.

On the downside, initial support is seen near the Asian session low of $4,219–$4,218, followed by key psychological support at $4,200 and Friday's low around $4,186. A sustained break below the $4,140 area would increase the risk of a steeper decline, exposing the pair to a potential drop toward the key support zone around $4,100. Below that, gold may enter a deeper corrective phase.

The material has been provided by InstaForex Company - www.instaforex.com