Created
: 2025.10.04
2025.10.04 03:55
Gold price advances during the North American session on Friday, up by 0.70% for the day as the US government shutdown extends to three days, poised to end the week positively for the seventh straight week. At the time of writing, XAU/USD trades at $3,882 after hitting a daily low of $3,838.
The US economic docket remains light, with the release of the Purchasing Managers Index (PMI) for September. Figures were mixed, as the Institute for Supply Management (ISM) revealed that the services survey clung to its expansion/contraction neutral level, while S&P Global showed that the economy expanded.
The data barely moved the needle, as Bullion extended its gains with traders eyeing a re-test of the record high of $3,896.
The US government shutdown impeded the release of Initial Jobless Claims on Thursday and Nonfarm Payrolls on Friday. The lack of data left traders adrift to a slew of Federal Reserve (Fed) officials crossing the wires.
Fed Governor Stephen Miran remained dovish, saying that access to data is important to set monetary policy and he remains hopeful the Fed would have access to economic releases. Nevertheless, he acknowledged that Fed policy should be forward-looking.
Chicago Fed President Austan Goolsbee acknowledged that risks to the dual mandate are balanced, adding that although the markets had priced in rate cuts, the central bank should remain data-dependent.
Regarding geopolitics, a Bloomberg article mentioned that "China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the US, dangling the prospect of a massive investment package."
In Washington, the US Senate is expected to vote again, though there is no sign that either the Democrats' or Republicans' plan would pass.
Gold price trend is up, but in the near-term it seems that it's consolidating around the $3,830-$3,880 range. Momentum shows that buying pressure has stalled, as depicted by the Relative Strength Index (RSI). The index, despite being overbought, has a flat slope, an indication of buyers unable to drive prices higher.
If XAU/USD clears $3,895, immediate resistance would be $3,900, followed by $3,950 and the $4,000 mark. Conversely, a drop below $3,830 will expose the October 2 low of $3,819 ahead of the $3,800 mark. Below, the next area of interest will be the 20-day Simple Moving Average (SMA) at $3,729.
Gold has played a key role in human's history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn't rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country's solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Created
: 2025.10.04
Last updated
: 2025.10.04
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