Gold Price Forecast: XAU/USD climbs to near fresh record high above $4,350 amid broader uncertainty

LONDON (October 20) Gold price (XAU/USD) holds positive ground around $4,370 after reaching a fresh record high near $4,380 during the early Asian session on Tuesday. Traders continue to assess the developments surrounding the US government shutdown, prospects for further rate cuts by the Federal Reserve (Fed) and renewed US credit risks.

The ongoing US federal government shutdown could boost the safe-haven flows, supporting the Gold price. The government shutdown has entered its 21th days with no end in sight, after senators failed for the 11th time to resolve the impasse in votes on Monday. The shutdown is now the third-longest funding lapse in modern history.

Additionally, expectations of a Fed rate cut contribute to the yellow metal’s upside. Traders are currently pricing in nearly a 99% possibility that the US central bank will cut interest rates again next week, followed by another reduction in December, according to the CME FedWatch tool. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. 

On the other hand, any signs of easing trade tensions between the US and China, the world’s two largest economies, could dampen demand for safe-haven assets such as gold. Comments from US President Donald Trump alleviated some concerns around its tensions with China, saying that they will have a “fair deal,” with the two sides slated to meet in the coming days.

All eyes will be on the US September Consumer Price Index (CPI) inflation data later on Friday due to the government shutdown-driven data drought. If the reports show a hotter-than-expected outcome, this could lift the US Dollar (USD) and undermine the USD-denominated commodity price in the near term. 

FXStreet