Gold weakens further below $4,050 amid tempered Fed rate cut prospects

• Gold remains on the defensive as mostly upbeat US NFP report tempers Fed rate cut bets.
• US economic concerns keep the USD below a multi-month top and could support XAU/USD.
• A weaker risk tone warrants caution before placing bearish bets around the precious metal.

Gold (XAU/USD) extends its steady intraday descent heading into the European session on Friday and hits a fresh daily trough, around the $4,030-$4,029 region in the last hour. Traders further scaled back their expectations for another interest rate cut by the US Federal Reserve (Fed) in December following the delayed release of the September US Nonfarm Payrolls (NFP) report on Thursday. This has been a key factor behind the recent US Dollar (USD) rally to its highest level since late May and is seen as a key factor driving flows away from the non-yielding yellow metal.

However, concerns about the weakening economic momentum on the back of the longest-ever US government shutdown hold back the USD bulls from placing aggressive bets. Furthermore, persistent geopolitical uncertainties, led by the protracted Russia-Ukraine war, weigh on investors’ sentiment. This is evident from a generally weaker tone around the equity markets and, in turn, could offer some support to the safe-haven Gold. This, in turn, warrants some caution for the XAU/USD bears and positioning for any meaningful depreciating move in the near term.