Gold recovers ahead of US sentiment data; bulls defend $3,950 support zone

• Gold recovers toward $4,000 after Thursday's sharp 1.59% drop, its biggest intraday fall since mid-August.
• Geopolitical tensions ease after Israel and Hamas approve the first phase of a US-brokered Gaza peace deal.
• Investors eye the University of Michigan sentiment data later on Friday amid delays to official government reports.

Gold (XAU/USD) regains upward momentum on Friday following a sharp pullback the previous day after retesting Wednesday's all-time high of $4,059. At the time of writing, XAU/USD is hovering around $3,990, up nearly 0.30% after rebounding from an intraday low near $3,947.

The pullback from record highs was largely driven by profit-taking and easing geopolitical risk following a US-brokered Gaza peace deal. The development reduced some of the geopolitical tensions, prompting investors to lock in gains.

The broader trend continues to favor the upside as investors seek refuge in Gold amid global economic and political uncertainty, coupled with a dovish Federal Reserve (Fed) outlook. Persistent geopolitical risks, including the protracted Russia-Ukraine conflict, and concerns over the ongoing US government shutdown underpin the metal's safe haven appeal.

At the same time, steady central bank buying and robust inflows into Gold-backed ETFs help sustain the metal's record-breaking rally, keeping it on track for an eighth consecutive weekly gain.

Market movers: Gold steadies as softer US Dollar, Gaza peace deal and US shutdown shape sentiment

• Gold recovers as the US Dollar (USD) trades slightly weaker and traders buy the dip following Thursday's 1.59% decline, the metal's biggest intraday fall since mid-August. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 99.35, near two-month highs and on track for its biggest weekly gain of the year.
• Bullion's rally this year signals rising investor distrust in the global fiscal and monetary order, says Ajay Rajadhyaksha, Barclays' Global Chairman of Research. "The debt loads of four major economies -- the US, the UK, France, and Japan -- are all over 100% of their respective GDP, while their fiscal profiles are still worsening," he notes. "Most importantly, there is virtually no political appetite for fiscal consolidation," Rajadhyaksha adds, warning that the yellow metal's recent rally despite healthy financial markets should alert policymakers.
• The US government shutdown, entering its tenth day, is beginning to cast a heavier shadow over the near-term economic outlook. With the labor market already showing signs of cooling, an extended shutdown could further weigh on employment conditions and business sentiment, reinforcing expectations that the Fed will deliver 25-basis-point (bps) interest rate cuts at each of its remaining meetings this year.
• Israel and Hamas formally approve the first phase of the Gaza peace deal, under which Israel will begin withdrawing troops and Hamas will release the remaining hostages.
• With government data delayed amid the US shutdown, investors turn to private-sector data. The preliminary University of Michigan Consumer Sentiment Index for October is due later on Friday, along with readings on Consumer Expectations and inflation expectations.

Technical analysis: XAU/USD rebounds toward $4,000 after defending key $3,950 support

Gold is showing strong recovery momentum after testing the $3,950 support zone. The metal is now challenging the $3,995-$4,000 resistance area, which coincides with the 21-period Simple Moving Average (SMA).

If bulls manage to sustain momentum above $3,980, further upside toward the $4,020-$4,030 region appears likely, opening the door for a potential retest of the all-time high and possibly new record territory.

However, failure to secure a break above the $4,000 psychological barrier could trigger a short-term pullback toward immediate support at $3,950, followed by the 50-period SMA around $3,933 and deeper losses toward $3,900. The Relative Strength Index (RSI) is currently around 53, indicating neutral momentum with room for either side to take control in the near term.