The growing confidence that the U.S. Federal Reserve will cut interest rates two more times this year has been the main driver behind the notable seven-week rally of the traditionally non-yielding yellow metal. Additional support stems from concerns that the prolonged U.S. government shutdown may negatively impact economic data, strengthening demand for safe-haven assets amid ongoing trade and geopolitical tensions.

Sanae Takaichi's victory in Japan's ruling Liberal Democratic Party (LDP) leadership elections has raised the likelihood that the Bank of Japan will postpone its next interest rate hike. Although this triggered a sell-off in the Japanese yen and supported the U.S. dollar, it has had little effect on gold's strong bullish momentum.

Even a generally risk-on sentiment in financial markets — which typically weighs on safe havens like gold — has not reversed the current positive impulse. This suggests sustained upward pressure in the XAU/USD pair and reinforces the likelihood that the current bullish trend will continue.

According to CME's FedWatch Tool, the probability of a 25-basis-point Fed rate cut in October and December is 95% and 83%, respectively — further bolstering gold's rally. In addition, the White House is expected to initiate mass layoffs of federal employees if President Donald Trump deems negotiations with Democrats on ending the partial government shutdown unsuccessful. This adds another layer of uncertainty and reinforces gold's appeal as a defensive asset.

Takaichi's win in the LDP's second-round vote also increases expectations that the BoJ will not commence rate hikes in October, offering further support for XAU/USD. Still, Japan's expected accommodative policy stance weighs on the yen, thereby strengthening the dollar — a factor which, together with overall market optimism, could potentially limit gold's upside in situations of overbought market conditions.

Key U.S. macroeconomic data releases have been postponed due to the ongoing government shutdown. In this context, speeches by FOMC members could influence USD sentiment and support gold prices.

From a technical standpoint, a move above the psychological $3,900 mark serves as renewed bullish confirmation, reinforcing the near-term optimistic forecast. However, the daily Relative Strength Index (RSI) remains well above the 70 level, indicating overbought conditions. This means that buyers should proceed with caution.

Conversely, any corrective pullback can be viewed as a new buying opportunity. Support is expected to be found in the $3,900–$3,885 area. A firm break below this region could trigger technical selling, driving the precious metal down toward the next support around $3,850. The area between $3,850 and the round figure of $3,800 remains the key reversal zone to watch.