Gold (XAU/USD) Prices Up 1.5% on the Day. Is Gold's $4,000 Breakout Sustainable?

[Redator]

Gold prices sailed past the $4,000/oz mark overnight to reach highs around the $4050/oz mark in the European session.

A mix of easy monetary policies, steady buying by central banks and rising world tensions seem to be driving the rally. That move beyond $4000/oz hints that market participants feel hopeful after the psychological barrier fell.

Overall, the momentum and the big‑picture forces look lined up, suggesting the $4,000 breach could be part of a long‑run cycle. A pull‑back might be a very good spot for would be bulls.

Most Read: Gold's (XAU/USD) Bull Run Just Getting Started? A Look at What History Says

How Fast the 2025 Run‑Up Happened

Gold’s climb this year has been oddly quick for a safe‑haven asset. It’s up 53 % since Jan. and rose 19 % in the last thirty days. In the past three years the price has even doubled.

That speed does not look like a reaction to inflation worries or a tiny interest‑rate tweak. It more likely means investors are pricing in big‑picture risk. Concerns include a flare‑up in world conflicts, the US debt ceiling drama, and even the recent government shutdown that showed governance cracks.

In some quarters, the discussion of the move in 2025 is around a potential change in the global monetary order.

What the answer is, remains purely guess work but does pose an interesting conundrum for market participants.

The Global Anxieties Propelling the Price

The climb in gold prices does not come from one thing alone. It seems to come from a mix of world problems that bring back gold’s role as a safe haven. A recent note from a BNP Paribas analyst summed it up: “right now, everything that is a classic gold driver is happening.”

The most significant driver is geopolitical instability. Ongoing conflicts, including the war in Ukraine and the escalating tensions across the Middle East (the Israel-Hamas conflict, airstrikes on Iran, and disruption to maritime trade), are pushing capital toward non-sovereign stores of value.

This is further complicated by political turmoil in developed nations, such as the French political crisis and the persistent US government shutdown and debt concerns. Market participants are expressing angst over US debt levels, the future of the dollar, and the independence of the Federal Reserve.

Adding to the complexity are macro bets on future monetary policy. Despite the dollar's relative strength, gold has found strong support from the expectation that the Federal Reserve will execute further rate cuts before the end of 2025.

Source: LSEG

Institutions Aiding the Gold Rally

While geopolitical risk drives headline fear, two critical institutional factors are powering the gold rush: central bank demand and the fear of a potential tech bubble implosion.

Central Bank Buying Spree: Central banks globally are aggressively diversifying reserves away from the US dollar and Treasuries and into bullion. This institutional buying spree is massive and unprecedented in recent history.

Central banks are on track to purchase an estimated 1,000 metric tons of gold in 2025, marking the fourth consecutive year of extraordinary accumulation. The People's Bank of China, in particular, has been a robust buyer for eleven consecutive months (September being month 11), demonstrating a structural, long-term shift in global reserve strategy.

Global physically backed gold ETFs recorded their largest monthly inflow in September, resulting in the strongest quarter on record of US$26bn.

Global ETF inflows on pace for record year

Source: World Gold Council

The AI Bubble Hedge: A crucial, less-traditional driver is the growing anxiety surrounding the Artificial Intelligence (AI) tech stock boom. Investors are hedging against the possibility of a "sharp correction" or even an implosion of the AI-driven market, a risk explicitly called out by institutions like the Bank of England.

Gold, in this context, has become a collective insurance policy against the systemic fallout of a highly speculative tech-sector crash.

The combination of these factors has transformed gold from a traditional defensive hedge into a "conviction trade," where dips in price are now universally treated as buying opportunities by institutions and retail market participants alike.

Looking Ahead

Later today markets will get the FOMC minutes which may hold more sway than usual in the absence of US data. This will also depend on what surprises the Fed minutes may reveal about the September meeting.

When the Federal Reserve lowered interest rates, most people thought their official announcements (the statement and the "Dot Plot" chart) suggested they would keep cutting rates easily. However, the Fed Chairman, Jerome Powell, spoke after the meeting and sounded more careful. He made it clear that they were not promising to cut rates again right away, which surprised many people.

If the minutes show more people than expected were considering a massive rate cut (a 50-basis-point cut), the value of the dollar could fall and Gold could get a renewed shot in the arm.

As far as we know, only one member, Stephen Miran, actually voted for that big cut, and Powell said most members disagreed. But the minutes will reveal if other members were at least thinking about it.

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Technical Analysis - Gold (XAU/USD)

From a technical standpoint, it is very difficult to pick a top at the moment. Not to mention that the lack of historical price action makes it near impossible.

There was a triangle pattern breakout which has finally reached its proposed target around the $4043/oz mark.

Usually market participants would hope for some form of pullback after such a move. However recent price action and the break of key psychological barriers suggest the rally could keep going.

The RSI period-14 remains in overbought territory and has been holding here for the last three days. Thus this is no real indication that a pullback might be imminent.

I will personally be focusing on the whole numbers ahead of $4075, $4100, $4150 up next.

Gold (XAU/USD) Four-Hour Chart, October 8, 2025

Source: TradingView (click to enlarge)

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