Gold Gains Support Amid Global Growth Concerns and Rising Expectations of Federal Reserve Rate Cuts

Market Overview

Gold (XAU/USD) surged toward $4,100 during North American trading hours on Monday, as renewed concerns about U.S. economic growth and mounting bets on Federal Reserve (Fed) rate cuts boosted demand for the precious metal.

The latest rally in gold comes after weaker-than-expected U.S. private employment data and a disappointing University of Michigan (UoM) Consumer Sentiment Index, which reinforced expectations that the Fed could soon adopt a more accommodative stance. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, thereby enhancing its investment appeal.

However, optimism surrounding a potential resolution of the U.S. government shutdown may limit safe-haven inflows. U.S. senators are set to vote on a proposal that could end the longest shutdown in American history, a move that could briefly weigh on gold. Meanwhile, easing U.S.–China trade tensions—as the two sides move closer to formalizing an agreement—could also temper demand for defensive assets in the short term.

Fundamental Outlook

Looking ahead, investor focus will shift to key U.S. macroeconomic releases this week. The October Consumer Price Index (CPI) report, due Thursday, is expected to show headline inflation rising 0.2% month-on-month, with core CPI projected at 0.3%. Softer-than-expected inflation data could strengthen expectations for an imminent Fed rate cut.

Additionally, Friday’s U.S. Retail Sales figures will provide further insight into consumer spending and the overall economic trajectory heading into the final quarter of the year. Any signs of weakness could bolster gold’s upside momentum as markets price in deeper monetary easing.

Technical Analysis – Daily Chart

Technical Overview

Gold remains within an upward trading channel, reflecting strong underlying bullish momentum.

• Moving Averages: Price continues to trade above all key SMAs, confirming an intact uptrend.
• RSI: Positioned in the buying zone, signaling continued buying pressure.
• Stochastic Oscillator: Suggests a positive trend, though short-term overbought conditions may trigger brief corrections.

Key Levels to Watch:

• Immediate Resistance: $4,152.00
• Immediate Support: $4,020.30

Trading Outlook

After reaching a new record high, gold’s upward momentum temporarily stalled, prompting a correction as traders took profits. However, the metal found strong support near the $4,000 level, maintaining its bullish structure.

The recent breakout from consolidation suggests that gold may retest resistance levels before resuming its broader uptrend. As long as the price remains above support, the bias stays positive.

Trade Suggestion:

• Entry (Buy Limit): $4,047.82
• Take Profit: $4,149.18
• Stop Loss: $4,008.23

Frequently Asked Questions (FAQ)

Q1: Why is gold rising despite easing U.S.–China tensions?
Gold’s gains are driven mainly by increasing expectations of Fed rate cuts and weak U.S. economic data, which outweigh the effects of improved trade sentiment.

Q2: How do lower interest rates support gold prices?
When interest rates fall, the opportunity cost of holding gold decreases, making the metal more attractive relative to interest-bearing assets like bonds.

Q3: What are the key events traders are watching this week?
Investors are focused on the U.S. CPI report (Thursday) and Retail Sales data (Friday) for clues about inflation trends and consumer strength—both crucial to shaping Fed policy expectations.

Q4: What could cause gold prices to correct lower?
A swift resolution of the U.S. government shutdown, stronger-than-expected inflation data, or a hawkish Fed statement could limit gold’s upside or trigger short-term pullbacks.

Q5: What’s the broader outlook for gold in Q4?
The medium-term trend remains constructive, with safe-haven demand supported by economic uncertainty, Fed policy shifts, and lingering geopolitical risks.

Disclaimer

This analysis is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument. Market conditions can change rapidly, and readers are encouraged to perform independent analysis or consult a licensed financial advisor before making trading decisions.