Gold (XAU/USD) extends its downside momentum for the second consecutive day on Friday, though it holds above Thursday’s low in early European trade. The Israel-Hamas agreement on the initial phase of a peace deal has slightly eased geopolitical tensions, prompting some profit-taking in the overbought precious metal. Still, several underlying factors may discourage aggressive bearish positions and call for caution before expecting further declines from Wednesday’s record high.
Expectations that the US Federal Reserve (Fed) will cut interest rates twice more this year, coupled with a mild pullback in the US Dollar (USD) from its early-August highs, are helping to cushion the downside for gold. Additionally, market uncertainty stemming from the ongoing Russia-Ukraine conflict and the extended US government shutdown is likely to limit deeper losses for the safe-haven metal. Despite the short-term weakness, XAU/USD remains set for an eighth straight weekly gain as traders look ahead to comments from Fed officials for near-term cues.
Daily Market Highlights: Gold resists pressure amid Fed outlook, softer USD, and geopolitical tensions
The USD hit its strongest level since early August on Thursday, prompting some long-position unwinding in gold after its record rally. The Israel-Hamas ceasefire announcement also weighed on safe-haven demand, driving prices lower overnight.
Fed Chair Jerome Powell refrained from giving new policy guidance, while the September FOMC Minutes revealed ongoing inflation concerns. However, markets continue to expect two rate cuts by the Fed before year-end.
Meanwhile, the US government shutdown has entered its second week with no signs of progress. The Senate failed for the seventh time on Thursday to pass any funding bill and won’t reconvene until next Tuesday.
Adding to global uncertainty, President Donald Trump stated that the US and NATO allies are increasing pressure to end the war in Ukraine. Early Friday, Ukraine reported heavy Russian missile and drone strikes targeting Kyiv’s infrastructure, causing widespread power outages.
This renewed geopolitical risk largely offsets the optimism from the Israel-Hamas peace progress. Combined with a slight USD decline, these factors help gold stay supported and on track to secure its eighth consecutive weekly advance amid a favorable macro backdrop.
