Gold Nears $5,600 to Hit New Record High as Fed Dovishness and Middle East Tensions Mount; Is $6,000 Not a Dream?

TradingKey - Global financial markets are being swept by a twin storm! On one side, spot Gold is staging a 'crazy bull run,' at one point breaking above $5,500/oz and nearing a record high of $5,600. Yet the enthusiasm of safe-haven capital remains undiminished. Combined with the conclusion of the Fed's 'Super Week' and the imminent announcement of a new Chair, will gold prices continue to surge or peak and retreat under these multiple stimuli?

Surging from $5,400 to nearly $5,600, gold completed a sharp advance in just two trading days. While driven by risk-off sentiment on the surface, it is actually the result of resonance among three forces: policy, geopolitics, and capital flows. Every driver has precisely hit the market's pain points, with some institutions already predicting gold will break the $6,000 mark this year.

The Fed sounds decidedly dovish as rate cut expectations heat up again, stimulating gold's charge toward $6,000

On Wednesday ET, the Fed maintained interest rates at 3.5%-3.75% as expected. While the decision appeared routine, it contained key signals supporting gold. At the press conference, Powell explicitly stated, 'No one expects a rate hike at the next meeting.' He added that if tariff-driven inflation peaks and recedes while the labor market weakens, policy will be eased appropriately. Meanwhile, the phrase 'downside risks to employment have increased' was removed, confirming a dovish policy stance.

For gold, this is undoubtedly a major tailwind. On one hand, while rates remain high, expectations for further hikes have completely dissipated, lowering the opportunity cost of holding gold. On the other hand, the market interpreted Powell's comments as 'a rate cut is only a matter of time.' Coupled with the Fed continuing its $40 billion monthly technical balance sheet expansion, expectations of loose liquidity have driven capital into precious metals.

Tensions flare in the Middle East as safe-haven capital floods in

Gold's frantic rally is further fueled by geopolitical conflicts 'adding oil to the fire.' On January 28, Trump publicly stated that a 'massive fleet is heading to Iran,' warning that the next attack on Iran would far exceed the mid-2025 strike on nuclear facilities. Iran's Foreign Minister immediately responded firmly, stating that its armed forces are on high alert and will decisively counter any aggression. The saber-rattling between the two sides instantly ignited market risk aversion.

The Persian Gulf, where Iran is located, controls over half of the world's oil reserves. Should the conflict escalate, it would not only drive up oil prices and trigger inflation fears but also disrupt global supply chain stability. Combined with the precedent of the U.S. invasion of Venezuela earlier this month, capital markets are highly sensitive to geopolitical risks. Gold, as the 'ultimate safe-haven asset,' has naturally become the preferred choice for capital, serving as the core catalyst for gold prices breaking all-time highs.

Double accumulation by central banks and funds provides strong capital support

The rise in gold prices is not short-term speculation but is backed by solid capital fundamentals. Global central bank gold reserve data for January 2026 shows that the total holdings of the top ten countries have risen steadily. The U.S. remains first with 8,133.46 tons, while China and Russia hold 2,305.37 tons and 2,326.52 tons, respectively. Continued central bank gold purchases provide a 'ballast' for prices.

IG market analyst Tony Sycamore also noted that the gold price rally has benefited from strong momentum among trend-following funds; even intraday pullbacks from highs are merely short-term profit-taking. 'Gold's fundamental support in 2026 is solid, and any correction is a highly attractive buying opportunity.' In contrast, the weak performance of silver and platinum further highlights gold's central position among safe-haven assets.

Fed Chair Suspense: A Dovish Appointment?

The upcoming announcement of the new Fed Chair this week has become another uncertainty affecting gold's trajectory. Trump has teased that the selection will be revealed soon and stated bluntly that 'interest rates will drop significantly after the new Chair takes office.' Markets worry about the erosion of Fed independence, further driving safe-haven demand while reshaping the dollar's path, indirectly linking the fates of both assets.

According to data from the prediction platform Polymarket, as of January 24, BlackRock executive Rick Rieder's probability of being elected has soared from 4% at the start of the year to 54%, far exceeding second-place Kevin Warsh (29%), making him the biggest dark horse. The veteran, who manages $2.4 trillion in assets, advocates for 'accelerating rate cuts to 3%,' showing a clearly dovish policy lean. If elected, he will likely accelerate the pace of easing, weakening the dollar's interest rate advantage.

Notably, divisions have emerged within the Fed; Waller has publicly supported further rate cuts, which may involve political considerations for the Chair position. Meanwhile, Powell has repeatedly emphasized that the 'Fed needs to stay out of politics' before leaving office, essentially paving the way for future policy stability. If the new Chair is overly submissive to the White House, it will not only trigger doubts about the dollar's credibility but also further strengthen gold's safe-haven status.

Morgan Stanley recently released a report raising its gold price target for the second half of 2026 from $4,750 to $5,700. Goldman Sachs and UBS have set year-end 2026 targets at $5,400, while Jefferies Group believes gold could reach $6,600/oz this year.

Goldman Sachs pointed out that slow growth in gold supply, coupled with increased holdings by central banks and private investors for strategic or safe-haven purposes, is driving demand growth and pushing prices to consecutive new highs. Goldman noted that in the future, if private institutions increase their gold allocations, prices could rise above their target.