Gold struggles below $4,000; Fed bets, geopolitics limit losses

Gold (XAU/USD) retains its negative bias for the second straight day on Friday, though it manages to hold above the overnight swing low heading into the European session. The Israel-Hamas agreement to the first phase of the peace deal helps ease some of the geopolitical tensions and prompts some profit-taking around the safe-haven commodity amid still overbought conditions. That said, a combination of factors might hold back bearish traders from placing aggressive bets and warrants some caution before positioning for an extension of this week’s pullback from the all-time peak, touched on Wednesday.

Against the backdrop of firming expectations that the US Federal Reserve (Fed) will lower borrowing costs two more times this year, a modest US Dollar (USD) pullback from its highest level since early August acts as a tailwind for the non-yielding Gold. Apart from this, the cautious market mood might contribute to limiting the fall for the safe-haven bullion amid the intensifying Russia-Ukraine war and the prolonged US government shutdown. Nevertheless, the XAU/USD pair remains on track to register gains for the eighth consecutive week as traders await Fedspeak to grab short-term opportunities.

Daily Digest Market Movers: Gold shrugs off Fed rate cut bets, softer USD, geopolitical and economic tensionsThe US Dollar rose to its highest level since early August on Thursday, prompting the XAU/USD bulls to take some profits off the table following the recent record-setting rally. Adding to this, a ceasefire deal between Israel and Hamas turned out to be another factor that contributed to the safe-haven Gold’s overnight downfall.Federal Reserve Chair Jerome Powell offered no fresh policy signals, while Minutes from the September FOMC meeting released on Wednesday showed lingering inflation concerns. Traders, however, are still pricing in a greater chance that the US central bank will lower borrowing costs two more times by the end of this year.The government shutdown is now in its second week amid few signs of progress toward a deal to advance funding bills. The Senate rejected motions to advance competing bills for the seventh time on Thursday and will not hold any further votes until at least next week, when the upper chamber is expected to return on Tuesday.US President Donald Trump said Thursday that Washington and NATO allies were stepping up the pressure to end the war in Ukraine. Ukraine reported a large-scale Russian assault on Kyiv early Friday, involving ballistic missiles and drone strikes, which targeted critical infrastructure and caused widespread power outages.This keeps geopolitical risks in play and largely offsets the optimism led by the Israel-Hamas agreement on the first phase of the Gaza peace plan. Apart from this, a modest USD downtick supports the precious metal, which seems poised to register gains for the eighth consecutive week amid a supportive fundamental backdrop.Gold needs to weaken below Thursday’s low, around $3,944 to back the case for further losses

The overnight breakdown and acceptance below the 100-hour Simple Moving Average (SMA) could be seen as the first sign of a bullish exhaustion. That said, it will still be prudent to wait for some follow-through selling below the overnight swing low, around the $3,944 region, before positioning for any meaningful corrective decline. The Gold price might then accelerate the downfall towards testing the $3,900 round-figure mark.

On the flip side, any intraday positive move beyond the $4,000 mark is likely to confront a hurdle near the $4,035-4,036 region ahead of the $4,059-4,060 area, or the all-time peak touched on Wednesday. Some follow-through buying will be seen as a fresh trigger for bulls and lift the Gold price towards the $4,100 round-figure mark.