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04/11/25
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Gold Falls as US Dollar Strengths Amid Fed Signals and Political Uncertainty
Gold experienced renewed downward pressure on Tuesday, primarily driven by the strengthening of the US dollar amid ongoing hawkish signals from the Federal Reserve. Despite persistent geopolitical tensions and uncertainties surrounding a potential protracted US government shutdown, the commodity’s decline remains cautious due to a mixed technical environment and support from safe-haven demand.
The US dollar advanced for the fifth consecutive day, reaching levels not seen since early August. The rally was fueled by the Fed’s indication that further interest rate hikes remain a possibility, with recent comments suggesting that rate cuts in December are not guaranteed. Market participants have now priced in a roughly 65% probability of a rate cut during the upcoming Federal Open Market Committee meeting, reinforcing the dollar’s strength and exerting pressure on non-yielding assets like gold.
However, political headwinds such as the ongoing US government shutdown continue to cloud the outlook. With the shutdown approaching the longest in US history, concerns about its economic repercussions have tempered dollar enthusiasm. Congressional deadlock persists, with negotiations failing to reach a resolution, although optimism remains that an agreement could be reached soon. Meanwhile, geopolitical risk factors continue to offer some support to gold, limiting deeper losses amid ongoing uncertainties.
From a technical perspective, the gold price remains vulnerable below key levels around $3,963 to $3,962. A confirmed move below this zone could accelerate declines towards the $3,940 level and further down to last week’s swing low near $3,886. Conversely, sustained strength above $4,000 faces resistance near $4,025, with a break above that potentially reviving bullish momentum and targeting the $4,100 level.
Gold’s price movements are heavily influenced by the inverse relationship with the US dollar and risk sentiment. It remains a favored safe-haven asset during times of political or economic instability, with central banks continuing to diversify reserves by adding gold. The outlook remains sensitive to interest rate expectations, geopolitics, and the dollar’s trajectory, which collectively shape gold’s short-term trend.
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