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Gold prices climbed on Thursday as the US dollar weakened and investor anxiety over a potential US government shutdown boosted safe-haven demand. The precious metal, a traditional hedge against economic uncertainty, gained traction ahead of critical fiscal deadlines in Washington.
Dollar Weakness Fuels Gold Rally
The dollar index fell for the second straight session, lifting gold’s appeal for foreign buyers. Since gold is priced in dollars, a softer greenback makes it cheaper for other currencies. Spot gold rose 0.5% to $1,900/oz, while US gold futures gained 0.6% to $1,915.
Analysts linked the dollar’s decline to mixed economic data and cautious Fed signals. Despite US economic resilience, inflation and growth concerns kept traders on edge.
“The dollar’s pullback is giving gold a much-needed lift,” said Priya Agarwal, TradeX Securities. “Investors are hedging ahead of US fiscal risks.”
US Shutdown Fears Drive Safe-Haven Demand
Gold’s rally gained momentum as lawmakers struggled to agree on a spending deal before the September 30 deadline. A shutdown could delay economic data, disrupt federal payments, and sour market sentiment—historically a boon for gold.
“A shutdown may push gold toward $1,930,” said Rajesh Khanna, Bullion Masters. “Uncertainty favors safe havens.”
Fed Policy: A Double-Edged Sword
The Fed’s rate stance remains pivotal. While policymakers held rates steady, they left room for another 2023 hike. Higher rates typically pressure gold (a non-yielding asset), but a dovish shift on economic risks could extend gains.
“Gold’s rally is fragile,” noted Meena Desai, Capital Insights. “Hawkish Fed talk may trigger profit-taking, but shutdown fears dominate for now.”
Global Risks Add Support
Beyond the US, China’s slow recovery and Europe’s recession risks kept central banks cautious. Strong central bank gold buying (led by China, Poland, Turkey) also underpinned prices.
Gold Outlook: Key Factors to Watch
Short-term price action depends on:
– US fiscal standoff: A prolonged shutdown = bullish for gold.
– Fed signals: Dovish tilt = higher prices; hawkish talk = resistance.
– Economic data: Weak jobs report could fuel gains.
Critical Levels:
– Support: $1,880 (must hold to sustain rally)
– Resistance: $1,930 (breakout target)
Conclusion
Gold’s rebound reflects dollar weakness and rising risk aversion. With US political chaos and global headwinds in play, prices may rise further if safe-haven flows persist. Watch Fed commentary, shutdown developments, and economic data for cues.
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