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Gold (XAU/USD) marks another milestone on Wednesday, smashing through the $4,000 level for the first time as investors flock to the precious metal amid global economic and political uncertainty, coupled with a dovish Federal Reserve (Fed) outlook.

At the time of writing, XAU/USD is trading around $4,039, hovering below record territory after hitting an all-time high of $4,049 earlier in the day, with prices up more than 4% so far this week.

The latest leg higher comes despite a stronger US Dollar (USD) as political turmoil in France and Japan fuels safe haven demand, driving flows into both the Greenback and Gold. Meanwhile, the prolonged United States (US) government shutdown has added to market jitters, reinforcing demand for the yellow metal.

Persistent geopolitical risks, including the ongoing Russia-Ukraine war and tensions in the Middle East, along with concerns about global trade disruptions, have further bolstered Bullion’s safe-haven bid. Meanwhile, steady central bank buying and strong inflows into Gold-backed exchange-traded funds (ETFs) are helping to sustain the metal’s record-breaking rally.

Market movers: Fed Meeting Minutes take center stage as US shutdown stretches into second week
 

• Central banks worldwide are on track to buy 1,000 metric tons of Gold in 2025, marking a fourth consecutive year of hefty purchases as they diversify reserves away from US Dollar-denominated assets into Bullion, according to consultancy Metals Focus.
• The US government shutdown has entered its second week with no sign of resolution as Democrats refuse to provide the votes needed by the ruling Republican Senate to reopen federal agencies without a deal on extending expiring healthcare subsidies. The prolonged standoff is delaying key economic data, complicating the Fed’s policy outlook, while President Donald Trump’s threat of mass layoffs adds to economic uncertainty.
• The US Dollar Index (DXY), which tracks the value of the Greenback against a basket of six major currencies, extends gains for a third straight session, climbing to its highest level since August 5, hovering near 98.83 as political shake-ups in France and Japan prompt investors to rotate out of the Euro and Yen.
• US Treasury yields remain on the back foot across the curve as investors slightly increase bets on faster Fed easing in the months ahead, with 111 basis points (bps) of interest rate cuts priced in by December 2026, according to a Deutsche Bank report. The CME FedWatch Tool indicates markets are pricing a 94.6% chance that the Fed will lower rates by 25 bps at the October 29-30 FOMC meeting.
• In the absence of key economic releases, traders will focus on comments from Fed officials, with the release of the September Fed Meeting Minutes later on Wednesday, which is expected to provide more context behind the recent “risk-management” rate cut.

Technical analysis: XAU/USD rally stretches, but overbought signals flag risk of pullback
 

Gold’s buying momentum remains unabated with the metal extending its historic run even as signs of overextension emerge. From a technical standpoint, the rally appears stretched, with the monthly Relative Strength Index (RSI) climbing above 90 for the first time since the 1980s, underscoring the risk of near-term overheating.

On shorter time frames, momentum gauges are similarly elevated, with the 4-hour RSI holding near 76 in overbought territory. This suggests that while the underlying trend remains firmly bullish, the market may face increased odds of a pullback or a period of sideways consolidation as traders book profits and reassess positions.

Immediate support lies at the 9-period Simple Moving Average (SMA) around the $4,000 mark on the 4-hour chart, followed by the 21-period SMA, which should act as the next downside cushion if prices retreat. On the upside, resistance is anticipated at $4,050, followed by the $4,100 zone, where profit-taking could intensify.

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