Gold (XAU/USD) has exhibited a mild negative trend, recently reversing an intraday dip below the $4,100 mark while trading just beneath a three-week peak during the early European hours on Wednesday. The broader market sentiment has shifted positively due to encouraging signals regarding the potential reopening of the US government, contributing to a risk-on environment that has placed downward pressure on this safe-haven asset. Additionally, an increase in demand for the US Dollar (USD) has further complicated gold's situation.
Despite the USD’s uptick, its growth may be restrained by speculations that a prolonged government shutdown could prompt the Federal Reserve (Fed) to consider monetary easing in December. These concerns are preventing aggressive bearish stances on Gold and helping stabilize its value against deeper losses. Investors remain cautious, awaiting remarks from key Federal Open Market Committee (FOMC) members, which could provide further insights into the Fed's monetary policy direction.
The reopening of the US government has shifted attention to the nation's fiscal challenges and emerging concerns regarding economic slowdown. According to estimations, the ongoing government closure has potentially reduced quarterly GDP growth by approximately 1.5% to 2%. The normalization of economic data is expected to reinforce these projections, following recent weak indicators regarding employment and consumer sentiment.
Data from Revelio Labs, a workforce analytics firm, indicates a loss of 9,100 jobs in October coupled with a reduction of 22,200 positions in government payrolls. The Chicago Fed has also suggested an uptick in the unemployment rate, indicating a softening labor market. These developments have negatively impacted the USD, leading it to a near two-week low and allowing non-yielding Gold to exhibit some recovery beyond the $4,100 level.
However, the overall positive market sentiment acts as a hurdle for the recovery of Gold prices. From a technical viewpoint, the XAU/USD pair appears to lack momentum to break past the 50% retracement level following a significant decline from its record peak achieved in October. While positive indicators on both daily and 4-hour charts favor bullish traders, any continued rise above the $4,150-$4,155 range could provide a stronger bullish outlook. If Gold manages to decisively surpass the 61.8% Fibonacci retracement level near $4,200, it may signal a more sustained upward movement in the near term.