Gold prices (XAU/USD) experienced a resurgence on Wednesday after a period of consolidation, rising almost 1.0% and trading near $4,170. This increase comes as investors exercise caution ahead of a vital congressional vote in the United States aimed at resolving a prolonged government shutdown. The House of Representatives is scheduled to deliberate on a stopgap funding bill designed to fund most federal entities until January 30, 2026, with certain departments receiving extensions until September 30, 2026.
Recent steps towards re-establishing government operations have lent some stability to risk sentiment. Investors are preparing for the release of previously deferred US economic data upon the government's reopening, offering potential insights into the Federal Reserve's (Fed) future monetary policy direction.
Overall, expectations of a dovish Fed and ongoing geopolitical concerns have helped sustain support for gold. Recent employment data suggest a cooling labor market, increasing speculation about possible Fed rate cuts, which has kept XAU/USD buoyant, particularly on dips.
Market dynamics are being driven by the impending House vote and Fed commentary, although the US economic calendar is relatively sparse on Wednesday. The US Dollar Index (DXY), which measures the dollar's strength against a selection of six major currencies, is hovering around 99.55, retreating from earlier highs of 99.71 as momentum has decelerated.
On Monday, the Senate's bipartisan 60-40 vote to approve a temporary funding bill represented a critical advancement in addressing the government shutdown. While progress has alleviated immediate fiscal concerns, caution endures among investors until final approval is obtained from the House.
The latest employment figures offer a mixed but generally softer outlook for the US labor market. The ADP report released on Tuesday noted a loss of an average of 11,250 private-sector jobs in four weeks leading to October 25, an improvement from the average loss of 14,250 jobs in the previous month. Simultaneously, the ADP Employment Change report indicated an increase of 42,000 private payrolls in October, surpassing expectations of a 25,000 gain and reversing the 29,000 drop witnessed in September. However, the Challenger Job Cuts report revealed that job cuts announced by US employers reached 153,074 in October, the highest monthly figure since 2003.
Easing global trade tensions tied to US tariffs have lessened some of gold's safe-haven allure. Nevertheless, market sentiment remains careful as the US Supreme Court is set to rule on the legality of some of the Trump administration's tariff policies, potentially affecting future trading frameworks.
Looking ahead, a relatively light economic calendar this Wednesday likely means subdued trading as investors await insights from several Fed officials regarding policy direction.
From a technical perspective, gold has successfully broken above the $4,150 resistance level on the 4-hour chart, confirming a bullish breakout from its recent consolidation phase. This breakout suggests a possible rise towards the $4,200 range, although this could serve as an upper limit before attempting to reach the all-time high near $4,381. Should prices retract, the old resistance at $4,150 is now seen as immediate support, with further support found around $4,100 and the 100-period SMA near $4,050-$4,030. The Relative Strength Index (RSI) currently sits near 68, just under overbought territory, indicating that while there may be room for further gains, the market may also be at risk of a short-term pullback.