Gold declines on profit-taking, renewed US Dollar demand | FXStreet
Gold price (XAU/USD) edges lower below $4,100 during the early European trading hours on Thursday. The precious metal has faced a sharp sell-off in the previous sessions on easing tensions between the United States (US) and China and the renewed US Dollar (USD) demand. Traders also book profits ahead of key US inflation data due on Friday. Furthermore, analysts believe that the end of the Diwali festival in India, the world’s second-largest gold consumer, might reduce physical demand and drag the price lower.
On the other hand, the ongoing US government shutdown and geopolitical tensions could boost the Gold price, as it is viewed as a safe-haven asset in times of uncertainty. The speculation about further interest rate cuts by the Federal Reserve (Fed) could underpin the yellow metal. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Traders will closely monitor the developments surrounding the US-China trade talks, as their trade representatives are scheduled to meet late this week ahead of a planned meeting between Chinese leader Xi Jinping and US President Donald Trump next week.
The release of the US September Consumer Price Index (CPI) inflation data will be in the spotlight later on Friday due to the government shutdown-driven data drought. If the report shows a hotter-than-expected outcome, this could lift the USD and weigh on the USD-denominated commodity price in the near term.
Daily Digest Market Movers: Gold extends the decline as traders continue to book profits
- The US President Donald Trump administration is considering a plan to curb an array of software-powered exports to China, from laptops to jet engines, to retaliate against Beijing’s latest round of rare earth export restrictions, Reuters reported late Wednesday.
- Gold experienced historic gains in 2025, with more than a 50% rise, surpassing previous volatile periods such as after the September 11 attacks, the 2008 financial crisis, or even the Covid-19 pandemic.
- The US government shutdown has entered its fourth week with no resolution in sight. The Senate is expected to vote again on a funding bill, though it’s likely to fail. This marks the second-longest government shutdown in US history.
- Trump said late Wednesday that a long meeting is scheduled with China’s Xi Jinping in South Korea, and thinks something will work out.
- “The sell-off appears to be largely technical, with profit-taking following an extended period of overbought conditions since September. Despite the pullback, bullion remains up roughly 55% this year, and the longer-term primary uptrend remains firmly intact,” said Russell Shor, senior market analyst at tradu.com.
- Fed funds futures imply a 97% chance of a 25 bps rate reduction, according to LSEG data.
Gold keeps the bullish vibe in the longer term above the key EMA
Gold price trades in negative territory on the day. According to the daily chart, the constructive outlook of the precious metal prevails, with the price being well-supported above the key 100-day Exponential Moving Average. The upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands above the midline near 57.25.
The immediate resistance level to watch is $4,140, the high of October 15. If buyers step in, Gold could invite fresh bullish momentum toward $4,330, the high of October 16. The next hurdle is seen at the upper boundary of the Bollinger Band of $4,365.
On the downside, the crucial support level for XAU/USD is seen at the 4,000 psychological level. More bearish candles and sustained action below the October 10 low of $3,947 could set the stage for a downside move that takes the price to $3,838, the low of October 3.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.