Gold consolidates below all-time high amid positive risk tone, overbought conditions

• Gold pauses after the recent record-setting run amid a heightened risk tone.
• Fed rate cut bets weigh on the USD and offer support the non-yielding commodity.
• Overbought conditions hold back the XAU/USD bulls from placing fresh bets.

Gold (XAU/USD) attracts some buying following a modest Asian session dip to the $3,853-3,852 region on Thursday and remains well within striking distance of the all-time peak touched the previous day. Investors seem relatively unfazed by a partial US government shutdown, which is evident from a generally positive tone around the equity markets. This, in turn, acts as a headwind for the safe-haven precious metal amid still overbought conditions. However, a combination of factors continues to support the commodity, warranting caution before confirming a near-term top and positioning for a meaningful decline.

The disappointing release of the US ADP report on private-sector employment on Wednesday reaffirmed market bets that the US Federal Reserve (Fed) will lower borrowing costs two more times by the end of this year. The dovish outlook fails to assist the US Dollar (USD) to capitalize on the overnight bounce from a one-week low and could benefit the non-yielding Gold. Furthermore, rising geopolitical tensions suggest that the path of least resistance for the XAU/USD pair remains to the upside and that any corrective pullback might still be seen as a buying opportunity. This should limit the downside for the commodity.

Daily Digest Market Movers: Gold continues to draw support from Fed rate cut bets and geopolitical risks

• US President Donald Trump's Republican Party failed to agree with opposition Democrats on a way forward on a spending bill. Investors, however, react little amid expectations of a limited impact on the economy due to a government shutdown. This, in turn, remains supportive of the positive risk tone and acts as a headwind for the safe-haven Gold price during the Asian session on Thursday.
• On the economic data front, Automatic Data Processing reported on Wednesday that private-sector employers shed 32K jobs in September, marking the biggest drop since March 2023. Moreover, the August payrolls number was revised down to show a loss of 3K compared to an increase of 54K reported initially. The data reinforced bets for two more rate cuts by the Federal Reserve by the year-end.
• Meanwhile, the Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) came in slightly above consensus estimates and improved from 48.7 to 49.1 in September. This assisted the US Dollar in bouncing off a one-week low touched on Wednesday. The momentum, however, runs out of steam amid dovish Fed expectations, which continue to support the non-yielding yellow metal.
• According to the Wall Street Journal (WSJ), the US will provide Ukraine with intelligence to support long-range missile strikes on Russian energy infrastructure. Trump approved the move, and US officials are urging NATO allies to do the same. This keeps geopolitical risks in play and should contribute to limiting any corrective decline in the safe-haven precious metal, warranting some caution for bears.
• Important US macro releases scheduled at the start of a new month, including the closely watched US Nonfarm Payrolls (NFP) report on Friday, are likely to be delayed on the back of a partial US government shutdown. Hence, speeches from influential FOMC members will play a key role in driving the USD demand and producing short-term trading opportunities around the XAU/USD pair.

Gold might consolidate before next leg higher amid the overbought daily RSI

From a technical perspective, the daily Relative Strength Index (RSI) is still flashing extremely overbought conditions and holding back the XAU/USD bulls from placing fresh bets. That said, the lack of any meaningful sellers and a goodish intraday rebound from sub-$3,800 levels on Tuesday validates the near-term positive outlook for the Gold. Nevertheless, it will still be prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of the recent well-established uptrend witnessed over the past month or so.

In the meantime, weakness below the Asian session low, around the $3,853-3,852 region, is likely to find decent support near the $3,825-3,820 area. Some follow-through selling, leading to a subsequent breakdown and acceptance below the $3,800 mark, could pave the way for deeper losses. The Gold price might then accelerate the fall towards the next relevant support near the $3,758-3,757 zone en route to the $3,735 region before eventually dropping to the $3,700 round figure.