XAU/USD. Analysis and Forecast

[Ben Graham]

Today, gold stopped at the $4,200 level, consolidating before its next move. Investors, it seems, are confident that new U.S. macroeconomic data will show signs of an economic slowdown due to the government shutdown and may push the Federal Reserve toward an additional rate cut in December. This scenario provides support for precious metal prices. The prevailing trend of selling the U.S. dollar is another factor supporting gold's valuation. Meanwhile, optimism caused by the positive development regarding the reopening of the federal government has little effect on investors, which strengthens risk assets and, as a result, reduces the appeal of this safe-haven asset.The U.S. Senate passed a funding bill aimed at ending the prolonged government shutdown, boosting market confidence and maintaining positive momentum in risk assets. This, in turn, may deter XAU/USD bulls from initiating new long positions.

The government's reopening also brings attention to the potential deterioration of fiscal indicators and concerns about a slowdown in economic activity. According to analysts' estimates, such a prolonged closure could reduce quarterly GDP growth by 1.5–2%. This, in turn, keeps U.S. dollar bulls on the defensive.

Investors are still pricing in roughly a 60% probability of a rate cut at the December FOMC meeting, which puts pressure on the dollar and supports gold's upward potential.

From a technical standpoint, the XAU/USD pair has not yet fully confirmed a breakout above the $4,200 level. However, given that oscillators on the daily chart remain positive, gold may attempt to break through the $4,250 level. On the other hand, a decline below $4,180 can be viewed as a buying opportunity, likely limiting the downside to the $4,100–$4,095 level. This zone represents a key support region — a break below it could trigger technical selling and push the metal even lower.The material has been provided by InstaForex Company - www.instaforex.com