Gold (XAU/USD) continues its stunning rally, smashing through the $3,900 mark for the first time ever as investors flock to the precious metal for safety. With growing political uncertainty in the U.S., France, and Japan â and rising expectations of interest rate cuts â gold is firmly in the spotlight.
As of Monday morning, XAU/USD is trading near $3,930, up 1.10% on the day, after hitting a fresh record high of $3,949 during the European session. This marks the eighth straight week of gains, as gold shines in the face of uncertainty.
Letâs break down why gold is surging, whatâs happening globally, and what could happen next.
đïž US Government Shutdown Fuels Safe-Haven Demand
The ongoing U.S. government shutdown has now entered its sixth day, with lawmakers failing to reach a funding agreement. This political gridlock has closed large parts of the federal government, raising fears about economic stability.
The White House has warned that mass layoffs could follow if the deadlock continues. With critical data releases â such as the Nonfarm Payrolls (NFP) report â now postponed, investors are left flying blind. As uncertainty builds, many are turning to gold as a classic safe-haven asset.
đ Fed Rate Cut Bets Boost Bullion
Markets are increasingly confident that the Federal Reserve (Fed) will cut interest rates twice more in 2025.
- According to the CME FedWatch Tool, there is a 95% chance of a 25-basis-point (bps) rate cut in October.
- There’s also an 84% chance of another rate cut in December.
Gold tends to perform well when interest rates fall, as it does not pay interest â making it more attractive when yields on other assets decline.
Adding to this sentiment, Fed Governor Stephen Miran recently stated that the Fed still has âconsiderable roomâ to cut rates and bring policy closer to a neutral level.
đ Political Tensions in France & Japan Add Fuel to the Fire
Goldâs rise isn’t just about the U.S. Political developments in Europe and Asia are adding to the global risk-off mood.
đ«đ· France:
French Prime Minister SĂ©bastien Lecornu resigned just four weeks into office after failing to secure parliamentary support. This political chaos has rattled European markets and hurt confidence in the euro.
đŻđ” Japan:
In Japan, Sanae Takaichi was elected leader of the ruling Liberal Democratic Party (LDP) and is set to become the countryâs first female prime minister. Markets view her leadership as potentially bringing softer monetary policy and more government spending, which has caused the Japanese Yen to weaken â prompting investors to move into gold.
đ” US Dollar Rises but Canât Stop Gold
Interestingly, the US Dollar Index (DXY) has also risen, now trading near 98.35, its highest level in two weeks. Usually, a stronger dollar weighs on gold, but this time, intensifying geopolitical and economic risks have kept goldâs momentum intact.
đ Technical Outlook: Can Gold Hit $4,000?
Gold is currently consolidating after reaching its all-time high of $3,949. Hereâs a quick technical breakdown:
- Support levels:
- First support at $3,900
- 21-period moving average (SMA) at $3,879
- Deeper support at 50-period SMA at $3,826
- Resistance levels:
- Immediate resistance is the record high of $3,949
- A clean break above this could open the path toward the psychological $4,000 level
- Momentum:
- The Relative Strength Index (RSI) is hovering around 69, just under overbought territory.
- This suggests gold may pause or pull back slightly before another upward move.
đ Whatâs Next for Gold?
Investors are now looking ahead to the Fedâs Meeting Minutes, due Wednesday. With government data delayed, market players will rely heavily on Fed commentary and private-sector indicators to gauge the next policy moves.
With inflation cooling, global political jitters, and expectations of lower interest rates, the stage appears to be set for gold to remain strong â possibly even testing $4,000 in the near term.
đ€ Why Is Gold So Popular Right Now?
â Hedge Against Uncertainty
Gold has always been a safe-haven during uncertain times â whether economic, political, or geopolitical.
â Protection Against Inflation
Gold retains its value over time and is often used as a hedge against inflation and currency devaluation.
â Central Bank Demand
According to the World Gold Council, central banks â especially in China, India, and Turkey â have been buying gold at record levels to diversify their reserves and stabilize their economies.
đ§ Gold FAQs (Quick Insights)
Why do people invest in Gold?
Itâs a hedge against inflation, a store of value, and a safe-haven asset in times of crisis.
What affects Gold prices the most?
Interest rates, the US Dollar, inflation, central bank policies, geopolitical tensions, and investor sentiment.
How is Gold linked to the US Dollar?
Gold typically moves inversely to the US Dollar. When the dollar weakens, gold prices often rise â and vice versa.
đ Final Thoughts
Gold is having a historic moment, fueled by a rare combination of global instability, dovish central bank expectations, and relentless safe-haven demand. Whether youâre a long-term investor or a short-term trader, this precious metal is making a powerful case for a place in your portfolio.
With momentum still strong and major hurdles like the U.S. shutdown and global political turmoil unresolved, donât be surprised if $4,000 gold becomes the next headline
