HG MARKETS:

Gold (XAU/USD) is attempting to extend a modest intraday rebound on Tuesday, though the recovery lacks strong bullish conviction as the metal remains on the defensive below the key $4,000 psychological mark during the early European session. A modest improvement in global risk sentiment has encouraged some dip-buying near the $3,966–$3,967 area, lending mild support to the precious metal.

Beyond technical factors, renewed concerns over potential economic fallout from a prolonged U.S. government shutdown, along with persistent geopolitical tensions and global trade uncertainties, continue to act as tailwinds for the safe-haven commodity.

Meanwhile, the U.S. Dollar (USD) has retreated slightly from its strongest level since early August, offering additional near-term relief for Gold. However, the Federal Reserve’s hawkish policy stance could limit any meaningful pullback in the Greenback, thereby capping the upside potential for the non-yielding yellow metal. The recent range-bound movement in Gold prices suggests that the market remains in a bearish consolidation phase, warranting caution before confirming the end of the recent retracement from October’s record highs.

Federal Reserve Chair Jerome Powell’s comments last week reinforced a cautious outlook, tempering market expectations for another interest rate cut in December. Powell stated that a further reduction in borrowing costs is “not a foregone conclusion,” prompting traders to scale back aggressive rate-cut bets. As a result, markets are currently pricing in around a 65% probability of a rate cut at the upcoming December 9–10 FOMC policy meeting  a shift that continues to bolster demand for the USD and weighs on Gold.

However, mounting economic risks associated with the ongoing U.S. government shutdown may limit the Dollar’s upside momentum. The standoff, now poised to become the longest shutdown in U.S. history, has deepened political divisions as Democrats refuse to back the Republican-led funding package. Senate Majority Leader John Thune expressed optimism about a potential resolution this week, though GOP Senator John Kennedy ruled out the possibility of eliminating the filibuster to advance legislation without bipartisan support.

Investors remain wary that an extended government closure could inflict broader economic damage, potentially slowing growth and pressuring the Fed to reconsider its tightening bias in the coming months. This uncertainty, coupled with heightened geopolitical tensions and lingering global trade risks, continues to support safe-haven demand for Gold, even as the metal struggles to regain momentum above the $4,000 threshold.

Looking ahead, the absence of key U.S. macroeconomic releases on Tuesday is likely to keep Gold traders focused on comments from FOMC members for fresh policy cues. Market participants will also monitor broader risk sentiment and developments surrounding the U.S. fiscal impasse for short-term trading opportunities in the XAU/USD pair.

In the near term, a sustained move above the $4,000 level could open the door for a test of the $4,025–$4,050 resistance zone, while failure to defend the $3,960 region may expose the next key support at $3,940. Overall, Gold remains caught between conflicting forces safe-haven demand amid uncertainty and the drag from a resilient U.S. Dollar  leaving traders cautious about the next decisive move.