Gold shows no signs of slowing its bullish momentum and continues to post steady upward moves, now recording a four-day winning streak with a gain of more than 3% in the short term. Buying pressure has held firm as political risk in the United States increases, weakening the U.S. dollar and allowing gold to regain ground. As long as these concerns persist, buying pressure could continue to dominate the next moves in XAU/USD.
Is Risk Sentiment Growing?
Gold is on track to post its best monthly performance in 14 years, driven by deteriorating confidence amid U.S. political tensions. On October 1, a government shutdown could occur if Congress fails to approve an extension of federal funding, which would mean the closure of non-essential government agencies and disruption of government operations in the short term.
Such an event could trigger a political confidence crisis, exposing institutional dysfunction and potentially causing billions in economic losses for the U.S. economy. It also underscores a broader political paralysis, adding uncertainty to institutional and financial stability.
The risk of a shutdown is already reflected in confidence indicators. The Fear and Greed Index has fallen in recent sessions, now hovering around 50 points and returning firmly to neutral territory. This decline confirms that political concerns are once again undermining investor sentiment.
Source: CNN
The drop in confidence has generated a risk-off sentiment, boosting demand for safe-haven assets. In this context, gold, the ultimate safe haven, has benefited and could continue to do so in the short term. If political uncertainty persists, buying pressure on XAU/USD is likely to remain elevated and extend the bullish bias in the coming sessions.
Is the Dollar Weakening?
The U.S. dollar is also under pressure. In addition to political uncertainty, expectations of further interest rate cuts have weakened confidence in the currency, reducing its appeal in recent weeks. The CME Group currently shows a 96.7% probability of a cut at the October 29 Fed meeting and a 75.8% probability of another cut at the December 10 meeting. This reinforces the perception that dollar-denominated investments could continue to deliver weak performance in the coming months, which in turn may compromise steady demand for the greenback.
Source: CMEGROUP
The DXY index, which measures the dollar’s strength against a basket of currencies, has also turned lower in recent sessions, falling below 98 points and moving closer to 96 points, its 2025 low. This persistent weakness reflects both the expectation of a prolonged rate-cut cycle and current political instability in the U.S.
Source: TRADINGECONOMICS
In this environment, gold remains one of the dollar’s main rivals. A weaker dollar boosts international demand for gold, since it is priced in dollars. As long as confidence in the greenback fails to recover, buying pressure on XAU/USD is likely to intensify further in the short term.
Gold Technical Outlook
Source: StoneX, Tradingview
- Short-term uptrend remains intact: Since late August, gold has maintained a solid bullish trend, with aggressive moves consistently pushing it to new record highs. For now, no significant corrections have emerged to threaten this trend, although the speed of the recent rally could pave the way for technical pullbacks in the short term.
- RSI: The RSI remains above 70, in overbought territory. At the same time, higher highs in price are contrasting with lower highs in the RSI, forming a bearish divergence. This suggests an imbalance in market forces that could result in short-term corrections.
- MACD: The MACD histogram remains slightly above the zero line, indicating bullish momentum remains intact. However, staying close to neutral also signals rising indecision, which could lead to more sideways price action in the coming sessions.
Key Levels to Watch:
- $3,900 – Major Resistance: A key psychological level in the absence of historical references. A firm breakout above would consolidate the bullish bias and open the way for new highs.
- $3,800 – Nearby Barrier: Immediate support reflecting recent neutrality. As long as prices hold above this level, buying pressure will likely prevail, though minor pullbacks could test this area.
- $3,700 – Critical Support: Recent lows and the most important level to defend the trend. A sustained break below would put the bullish structure at risk and could trigger a short-term bearish bias.
Written by Julian Pineda, CFA – Market Analyst
Follow him: @julianpineda25
