Gold Price Forecast: XAU/USD picks up to $3,970 on risk-off markets

• Gold picks up to the $3,970 area, amid higher demand for safe assets.
• Growing concerns over an AI bubble have sent equity markets tumbling across the globe.
• XAU/USD's upside attempts remain limited as the US Dollar remains firm.

Gold (XAU/USD) is trading higher on Wednesday, supported by increasing demand for safe assets, with traders spooked by the sell-off in global equity markets. The precious metal bounced up from Tuesday's lows in the area of $3,930 to session highs above $3,970 in the early European session, although it remains halfway through the last two weeks' trading range.

Safe-haven assets remain buoyed on Wednesday following significant declines in the major Wall Street equity indices, which have spread through Asia and Europe. Concerns about an AI bubble resurfaced this week, as the CEOs from some of the US largest banks warned of a significant correction as geopolitical tensions increase.

The precious metal, however, remains trapped within previous ranges, as the hawkish tilt by Federal Reserve (Fed) Chairman Jerome Powell and the wide division among the central bank's policymakers has prompted investors to reassess their bets for a December rate cut. This is providing support to US Treasury yields and the US Dollar, and keeping Gold's recovery attempts limited so far.

In the US, the Government shutdown enters its fifth week, on track to become the largest in history, depriving the market and the Fed of key data to decide monetary policy. The release of the ADP Employment Change, thus, is likely to gain particular relevance later today. The market consensus anticipates a 24,000 increase on private payrolls in October, after a 32,000 decline in September, still at levels well below the nearly 150,000 new jobs averaged from 2010 to 2025.

Later on the day, the US ISM Services PMI is expected to show a mild recovery of the sector's activity, with October's reading increasing to 50.8 from the 50.0 level in September.