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Gold price (XAU/USD) extends the rally to near $3,990 during the early Asian session on Wednesday. The expectation of a US interest rate cut, geopolitical risks and economic uncertainty provide some support to the precious metal. Traders will keep an eye on the FOMC Minutes later on Wednesday. 

The rally of the yellow metal is bolstered by the safe-haven flows as the US government shutdown entered its second week. The ongoing shutdown has delayed the release of key economic data, including the US Nonfarm Payrolls (NFP) data, which is potentially complicating the Fed's decision-making.

The US Federal Reserve (Fed) is widely expected to cut the federal funds rate by 25 basis points (bps) at its October meeting, lowering the target range to 3.75% to 4.00%. Financial markets are now pricing in nearly an 83% chance of an additional Fed rate cut in December, according to the CME FedWatch Tool, though this will likely depend on data released before then. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. 

Meanwhile, political turmoil in France and Japan contributes to the upside of gold. Sanae Takaichi’s surprise victory in the Liberal Democratic Party (LDP) leadership election marks an important turning point for Japan’s policy and market outlook and pushes back the likely timing of the Bank of Japan’s (BoJ) next rate hike. In France, new Prime Minister Sebastien Lecornu and his government resigned on Monday, hours after taking office, deepening the country’s political crisis.

Looking ahead, the FOMC Minutes will be closely watched later on in the day, as they might offer some hints about the US interest rate path. Any signs of a hawkish tone from the Fed could lift the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term.

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