XAU/USD breaks through $4,200, reaching a new high of $4,213 in 3 weeks on Fed easing signals

Gold prices breaking through technical resistance levels reflect an expectation of an intensifying bearish market. On Thursday during Asian hours, the international gold market touched $4,213 per ounce, reaching its highest level in three weeks, which signifies not just a simple price increase but a clear market reassessment of the Fed’s policy direction.

After the Federal Government Reopening, Signs of Economic Weakness Drive Gold Buying

Despite the short-term risk mitigation from the resolution of the US federal government shutdown, the aftermath of prolonged government paralysis has become a major concern for the market. Economists estimate that this shutdown reduced quarterly GDP by 1.5-2.0 percentage points, creating conditions sufficient to stimulate demand for safe assets like gold.

Labor market indicators also justify concerns about economic slowdown. In October, 9,100 jobs were lost in the US, and government employment decreased by 22,200. The Chicago Federal Reserve also confirmed rising unemployment, making the cooling signals in the labor market more apparent. As these bearish indicators accumulate, investor sentiment has gradually shifted toward the scenario of interest rate cuts.

December FOMC, 60% Probability of an Additional 25bp Rate Cut

The market is now focused on gauging the Fed’s next move. The probability of a rate cut at the December Federal Open Market Committee(FOMC) meeting is currently priced at around 60%, which weakens the dollar’s upward momentum and acts as a clear tailwind for non-yielding assets like gold.

Although there are differing voices within the Fed, the signals of worsening labor market conditions are gaining stronger traction. Some regional Fed presidents assess the current employment situation as delicately balanced and believe that a rate cut will not immediately lead to inflation worsening. With this predominantly dovish interpretation, upward pressure on gold prices continues.

Technical Analysis: Break Above $4,200 Psychological Level Triggers Further Upside Scenarios

On the chart, XAU/USD has broken above both the psychological threshold of $4,200 and the 61.8% Fibonacci retracement level of the recent correction, establishing a firm footing. As oscillators on daily and 4-hour charts maintain bullish momentum, the medium-term outlook remains positive.

If this technical stance persists, the prevailing analysis suggests that testing the $4,250–4,255 range, followed by re-tests of $4,285 and $4,300, is quite feasible. Conversely, even if a correction occurs below Thursday’s Asian session low of $4,180, the market is likely to see this as a buying opportunity. In that case, the first support level would be in the $4,100–4,095 range, and if this level is clearly broken, further declines toward the 38.2% retracement at $4,075 should be considered.

Macro Environment Continues to Support Bullish Bias for Gold Prices

The current economic environment combined with expectations for the Fed is likely to favor higher gold prices. While the government reopening alleviates some risks, underlying signals of economic slowdown and weak employment exert stronger downward pressure. Even if short-term corrections occur, they are likely to be viewed as buying opportunities, and as long as technical support and macro fundamentals remain aligned, the upward trend in gold is expected to continue.