Gold Outlook: Consolidation Continues, Government Reopening Could Be a Key Catalyst

Over the past week, gold maintained a range-bound trend, with early trading today seeing it reclaim the $4,000 level. Current support for gold comes from three main factors: first, the ongoing U.S. government shutdown has boosted safe-haven demand; second, global tech sector weakness has dampened risk appetite; and third, central bank purchases, particularly by the People’s Bank of China (PBoC), continue to provide steady support. However, shifting market expectations around a December Fed rate cut are capping gold’s gains.

With the prospect of the government reopening now in sight, traders should closely monitor any progress this week. In my view, this could be a key catalyst for a directional move in gold.

Technical Observation: Bulls and Bears in Contention, Watch $4,050

Looking at the XAUUSD daily chart, gold has been trading between $3,930 and $4,030 over the past week. While bulls retain a modest edge, gold is essentially consolidating in a balanced pattern—upside is limited, and downside capped. With major data like nonfarm payrolls absent, the market lacks clear directional cues, prompting cautious trading.

Gold is now actively testing the recent range high of $4,050. If bulls can sustain pressure and close above this level, $4,100 could serve as the next key resistance. A successful break above that could open the door to further gains. Conversely, a close below $4,000 could see $3,880–$3,900 (around the 50-day moving average) provide a support buffer.

Safe-Haven Flows + Central Bank Buying Bolster Gold

One key driver of recent gold support has been safe-haven buying. Concerns over valuations have led to notable pullbacks in global tech stocks and AI-related equities, with the Nasdaq recording its largest weekly drop in seven months. Declining risk appetite has prompted some funds to shift into defensive assets like gold.

Meanwhile, the U.S. government shutdown has reached 40 days, marking a historic record. With partisan disagreements unresolved, key economic data releases have been delayed, forcing the market to rely on private-sector data to gauge economic conditions.

Signs of a cooling labor market are evident. Challenger data show October layoffs hit a 20-year high for the month (153,000), concentrated in tech and warehousing, driven by cost-cutting and AI adoption. Additionally, the University of Michigan consumer sentiment index for November fell to 50.3, a three-year low, while the October ISM manufacturing PMI dropped to 48.7, remaining below the 50 threshold for eight consecutive months.

These signals of economic weakness reinforce gold’s safe-haven appeal, sustaining buying interest. At the same time, falling short-term Treasury yields and a weaker dollar further support gold, a non-yielding asset priced in USD, and make it more accessible for non-dollar holders in regions like the Eurozone and Japan.

Central bank purchases have also provided structural support for gold. The People’s Bank of China increased holdings for the 12th consecutive month, while central banks in Poland, Turkey, and other emerging markets steadily boosted reserves. These “de-dollarization” efforts complement safe-haven flows, forming a strong foundation for gold bulls.

Swinging Rate-Cut Bets Keep Gold Under Pressure

Despite multiple supportive factors, gold faces resistance to further upward moves. Market reassessment of the Fed’s policy outlook has limited follow-through buying.

While recent data point to economic softness, Fed officials remain divided on rate cuts. Powell has emphasized that a December cut is “not set in stone,” stressing that policy decisions must adapt to incoming economic data.

Last week, officials including Vice Chair Jefferson and New York Fed Governor Williams reiterated that inflation remains sticky, signaling a hawkish stance. Yet, cooling labor market indicators and declining consumer confidence leave room for dovish arguments, keeping calls for continued accommodation alive.

Currently, the market assigns less than a 70% probability to a 25bp Fed rate cut in December. This oscillation in policy expectations is limiting gold’s ability to form a clear trend. In the short term, prices may continue to fluctuate within a range, and a true directional breakout will likely require either clearer policy guidance or a shift in risk sentiment as a catalyst.

Watching Developments on the Government Shutdown

Overall, gold remained in a wide-range consolidation last week. The prolonged U.S. government shutdown has elevated safe-haven demand, while private-sector employment data show a cooling labor market, and cracks in AI sector valuations further dampen risk appetite. These factors collectively support gold bulls. However, with official economic data delayed, Fed rate-cut expectations remain constrained, limiting short-term upside.

For now, gold is likely to remain in a broad trading range until a new catalyst drives a clear directional breakout.

This week, the market will closely monitor any progress on ending the government shutdown. According to AXIOS, several Democratic senators said on Sunday that they are ready to advance a package to reopen the government—a potentially significant breakthrough in negotiations after more than a month.

The shutdown has caused Treasury balances to pile up, effectively withdrawing roughly $700 billion from circulation and suppressing risk appetite. Once the government reopens, this liquidity is likely to flow back into the market, supporting a potential rebound in equities and benefiting gold as well.