Gold Hits Record High as Dollar’s Foundation Cracks

Key Takeaways:

*Shutdown adds fiscal risk: The prolonged U.S. government shutdown has suspended key data and deepened concerns over debt and fiscal credibility.

*Fed pivot priced in: Markets now see near certainty of an October rate cut and a strong chance of another by year-end, weighing on yield appeal.

*Gold reclaims safe-haven dominance: Surging above $3,950, gold has overtaken the yen as the preferred risk hedge amid global political instability.

Market Summary:

The U.S. Dollar Index (DXY) held near the 98.50 region, buoyed by weakness in major counterparts but constrained by domestic uncertainty and mounting expectations of Federal Reserve rate cuts. The greenback’s strength this week has been largely relative—driven by political crises in Europe and Japan that have temporarily boosted safe-haven demand. Yet, beneath the surface, the dollar’s footing remains fragile as the U.S. government shutdown stretches into its second week, suspending key economic data and deepening fiscal anxiety across markets.

The prolonged shutdown has amplified concerns over the U.S. growth outlook and fiscal credibility. With critical releases such as Nonfarm Payrolls, CPI, and GDP data delayed indefinitely, investors are left navigating without macro visibility. The disruption comes at a time when the Treasury’s borrowing needs are expanding, reigniting debate over debt sustainability. The absence of data-driven guidance has also clouded the Fed’s policy path, with futures now pricing in a 95% probability of a 25-basis-point rate cut in October and another before year-end—an aggressive easing cycle that could erode the dollar’s yield advantage.

Amid this backdrop of political dysfunction and policy uncertainty, gold has surged as investors seek safety beyond traditional fiat assets. The precious metal soared above $3,950 per ounce, marking a new record high as falling real yields and declining rate expectations strengthened its appeal. Gold’s ascent underscores growing concerns over currency debasement and long-term inflation risks, especially as governments worldwide pursue expansive fiscal measures. The rally also highlights a notable decoupling from its usual inverse correlation with the dollar—an indication that investors are fleeing not just risk assets, but the credibility of paper currencies themselves.

From a structural standpoint, gold’s bullish momentum is reinforced by strong central bank purchases and rising ETF inflows, while speculative traders continue to chase upside momentum. Analysts at major institutions, including UBS, have raised their year-end targets toward $4,200, reflecting a sustained regime of dovish monetary policy and geopolitical fragility. For the dollar, near-term direction remains clouded by fiscal uncertainty and policy divergence; for gold, the path of least resistance continues higher, powered by the very same dynamics undermining the greenback’s foundation.

Technical Analysis

DXY, H4

The Dollar Index has broken above its multi-month descending trendline, signaling a potential shift in medium-term momentum from bearish to neutral-bullish. After peaking near 98.75, price pulled back slightly but remains above both the 20- and 50-period SMAs, suggesting that the uptrend could stay intact if it holds above 97.95–98.15 support.

The RSI has eased from near-overbought territory and now consolidates around mid-range, implying cooling momentum rather than a reversal. Meanwhile, the MACD histogram has flattened but remains above zero, showing that bullish momentum is moderating, not collapsing.

If the index sustains above 97.95, buyers may attempt another push toward 98.75, while a break back below 97.50 would expose downside risk toward 97.00 and 96.60.

Resistance levels: 98.15, 98.75
Support levels: 97.50, 97.00

XAUUSD, H4

Gold’s upward momentum remains intact as the metal extends its rally within a clear ascending channel, pushing toward the 1.618 Fibonacci extension at $3,970. The pattern shows a series of higher highs and higher lows, with the price consistently finding dynamic support along the 20- and 50-period SMAs.

Momentum indicators reveal a strong bullish bias but warn of near-term overextension that the RSI hovers above 77, deep in overbought territory, while the MACD continues to widen on the upside, confirming sustained bullish pressure.

If gold consolidates above the $3,880–$3,900 region, the next leg higher could test $3,970–$4,000. However, a pullback below $3,880 could invite short-term profit-taking toward the $3,790 Fibonacci level, where fresh buyers may re-emerge to defend the trend.

Resistance levels: 3970.00, 4000.00
Support levels: 3880.00, 3790.00