Gold prices slowed down after excessive gains and consolidated below $4,000

Huitong Financial APP News--On Friday (October 10), spot gold stabilized, hovering around US$3985. It was difficult for bulls to expand their gains above the psychological threshold of US$4000. Gold prices tested a record high of $4059 on Wednesday and fell sharply the next day.
The fall in gold prices from historical highs was mainly driven by two factors: one was profit-taking by investors, and the other was the alleviation of geopolitical risks after the US-brokered Gaza peace agreement was reached. This development has reduced some geopolitical tensions and prompted investors to lock in gains.
The overall trend remains bullish. Global economic and political uncertainty and dovish signals from the Federal Reserve have led investors to turn to gold as a safe haven. In addition, geopolitical risks such as the continuing conflict between Russia and Ukraine have not disappeared, as well as concerns about the US government shutdown, which have supported gold's safe-haven appeal.
At the same time, central banks continue to purchase gold, and gold ETFs (exchange-traded funds) have also welcomed strong capital inflows. These factors have helped gold continue its record rise and is expected to rise for the eighth consecutive week.
Market drivers: The combined impact of a weakening dollar, the Gaza peace agreement and the U.S. government shutdown
The initial value of the University of Michigan Consumer Confidence Index in October was 55.0, slightly higher than the forecast of 54.2, but slightly lower than the 55.1 in September. Consumer expectations fell to 51.2 from 51.7, and inflation expectations were basically flat. Among them, the one-year inflation expectation fell to 4.6% from 4.7% in September, and the five-year inflation expectation stabilized at 3.7%.
Although the dollar weakened slightly and traders began to buy on dips after gold plunged 1.59% on Thursday, the biggest one-day decline since mid-August, gold is still struggling to recover. The U.S. Dollar Index (DXY), which tracks the U.S. dollar's exchange rate against six major currencies, is currently trading around 99.35, near a two-month high, and is on track to record its largest weekly gain of the year.
Ajay Rajadhyaksha, chairman of global research at Barclays Bank, said that the rise in gold prices this year reflects investors 'growing distrust of the global fiscal and monetary system. "The debt of the four major economies-the United States, the United Kingdom, France and Japan-exceeds 100% of their GDP, and their fiscal positions are still deteriorating," he pointed out. He further added: "The most important thing is that there is almost no political force currently willing to advance fiscal consolidation." He warned that even if financial markets are performing solidly, gold prices have continued to rise in the near future, a phenomenon that should alert policymakers.
The U.S. government shutdown has entered its tenth day and is beginning to have a more serious impact on the short-term economic outlook. The labor market has shown signs of cooling. If the shutdown continues, it may further drag down employment and business confidence, thereby strengthening market expectations. The Federal Reserve may announce a 25 basis point interest rate cut at every meeting for the rest of the year.
Israel and Hamas formally approved the first phase of the Gaza peace agreement. According to the agreement, Israel will begin to withdraw its troops and Hamas will release the remaining hostages.
Technical analysis:Spot gold holds key support level of $3950 and stagnates below $4,000
Gold is trying to recover after testing the $3950 support range and is currently challenging the $3,995 - 4,000 resistance range, which coincides with the 21-period simple moving average (SMA).
If bulls can maintain their gains and stabilize gold prices above US$3980, they are expected to move further to the US$4,020 - 4,030 range, which may then retest historical highs or even break records and hit new highs.
However, if the price of gold fails to break through the psychological barrier of $4000, it may trigger a short-term correction, first pointing to the immediate support level of $3950, and then possibly testing the 50-period simple moving average (approximately $3933). If the decline widens, it may also hit $3900. The current Relative Strength Index (RSI) is about 53, indicating that short-term momentum is neutral and both sides have a chance to control the situation.