• Fed rate cuts and dollar weakness are driving gold higher, with markets pricing two more cuts this year.
• Geopolitical risks and U.S. shutdown uncertainty keep safe-haven demand strong despite record equity highs.
• Structural flows from ETFs and central banks reinforce the rally, with forecasts eyeing $4,000 by year-end.

Gold remains firm on Friday, holding above $3,860 level after marking a top at $3,896 in the previous session. The precious metal is on the way to close its seventh straight weekly gain, with 2.7% in the current week alone and posting 47% YTD gains. The rally is fueled by Fed rate cut bets and geopolitical uncertainty.

The US government shutdown enters its third day, lending more room to the gold bulls. The shutdown has delayed the release of key economic data like NFP, depriving markets of an important gauge of labor momentum. Treasury Secretary Scott Bessent warned the disruption could damage the economy more than the past shutdowns, but equity markets have neglected the risk with Wall Street setting fresh highs. The risk-on sentiment has limited gold’s safe-haven appeal, but a more significant driver remains the Fed’s policy outlook.

According to the CME FedWatch tool, the markets are now pricing in a 97% chance of a rate cut in October with an 88% probability of another cut in December. The dovish tilt of the Fed, reinforced by weaker ADP employment, has weighed on the US dollar, supporting the yellow metal. According to UBS analyst Giovanni Staunovo, “As we anticipate further rate cuts, this should support the gold price further over the coming months, looking for the yellow metal to breach the $4,000/oz mark by the end of this year.”

Geopolitical risks are also providing adequate room for the gold’s bullish narrative. Reports of US aid to Ukraine hitting Russian energy infrastructure, combined with heightened Middle East tensions, have prompted investors to hedge against global instability. The profit-taking could trigger a corrective downside, but buyers will likely emerge on dips.

On the other hand, structural flows continue to underpin the rally, as ETF holdings climbed beyond 100 tons in September, with investors rotating out of bonds into bullion. Central banks of emerging markets are also steadily buying gold, diversifying away from the US dollar.
 

Gold Technical Forecast: Bulls to Reclaim $3,900
 

(Click on image to enlarge)

Gold 4-hour chart
 

The gold price wobbles around 20-period MA with 50-, 100-, and 200-period MAs pointing to a clear uptrend. The RSI remains above the 50.0 level, showing bullish strength despite yesterday’s pullback. Any further upside move could target $3,900 level, which is a key resistance.

On the flip side, immediate support lies at yesterday’s lows around $3,820, ahead of the 50-period MA near $3,800, and ahead of the horizontal level near $3,790.

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