Gold Price Forecast: XAU/USD nears $5,100 record high amid renewed trade uncertainties
- Gold resumed its uptrend on Tuesday, aiming to retest record highs in the $5,100 area.
- Trump's trade uncertainties and rising odds of an imminent US government shutdown are boosting demand for safe havens.
- A potential double top at $5,100 would bring support at $5,000 back into play-
Gold (XAU/USD) has resumed its broader upside trend on Tuesday, and returns to levels near the all-time highs in the $5,100 area. Trade uncertainties, growing fears of a US government shutdown, and market expectations of further Fed easing are boosting demand for safe havens.
US President Trump brought concerns about its erratic trade policy back to the table after raising 10% tariffs on South Korea by 10%, following a trade rift with Canada on Monday and the EU last week. Meanwhile, US Senate Democrats are threatening to block funding for the Department of Homeland Security (DHS), in response for the killings in Minnesota, which would lead to a partial government shutdown.
Technical analysis: Gold bulls aim at levels above $5,100
The XAU/USD pair maintains its positive trend with bulls aiming for a retest of the $5,100 resistance area, although the indicators in the 4-hour chart are showing signals of an exhausted rally. The Moving Average Convergence Divergence (MACD) shows a bearish crossover near the zero line, with momentum slipping into negative territory, and the Relative Strength Index (RSI) is pulling back from overbought levels.
A rejection at $5,100 would suggest a double top, a bearish sign, and give bears hopes for a retest of Monday's lows, at $4,990, looking for a corrective pullback towards the January 23 low in the $4,890 area.
A successful break of the $5,100 level, on the contrary, would expose the 261.8% Fibonacci extension of the January 16-21 rally, at the $5,450 area.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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