Gold advances back closer to $5,200 mark amid geopolitical tensions and USD weakness
- Gold regains positive traction and remains close to the monthly high set on Tuesday.
- Geopolitical risks act as a tailwind for the safe-haven commodity and revive demand.
- Renewed USD selling offsets the Fed’s hawkish outlook and benefits the commodity.
Gold (XAU/USD) attracts some dip-buyers following the previous day's modest pullback from the monthly top and climbs back closer to the $5,200 mark during the Asian session on Wednesday. Geopolitical risks remain in play ahead of the third round of US-Iran nuclear talks, scheduled on Thursday, amid a buildup of American forces in the Middle East. This turns out to be a key factor that helps revive demand for the safe-haven precious metal. Apart from this, the emergence of some US Dollar (USD) selling provides an additional boost to the commodity and contributes to the intraday move up.
Despite the US Federal Reserve's (Fed) hawkish outlook and Tuesday's positive economic data, investors remain on edge in the wake of renewed turbulence over US President Donald Trump’s trade policies. In fact, minutes from the January FOMC meeting showed that several Fed officials judged that additional easing may not be warranted until there was an indication that the progress of disinflation was back on track. Furthermore, the recent comments from a slew of influential policymakers suggested the US central bank is in no hurry to cut interest rates in the coming months amid still sticky inflation.
Boston Fed President Susan Collins said on Tuesday that it will be appropriate to hold in the current range for some time. Meanwhile, Richmond Fed President Thomas Barkin noted that monetary policy is “well-positioned” to address the risks surrounding the economic outlook. On the economic data front, the Conference Board’s Consumer Confidence Index improved to 91.2, up from January’s 89.0 (revised from 84.5). The USD bulls, however, struggle to attract any follow-through buying as investors remain concerned about the persistent uncertainty surrounding Trump's global tariffs.
On Tuesday, the US moved ahead with a 10% tariff on all non-exempt goods, as initially announced by Trump on Friday after the Supreme Court verdict against his sweeping tariffs. Trump, however, pledged to raise duties to 15%, fueling worries about retaliatory measures and the potential economic fallout from disruptions to global supply chains. This, in turn, keeps a lid on the USD upside, lending additional support to the Gold price. However, a generally positive tone around the equity markets might hold back the XAU/USD bulls from placing aggressive bets and cap any further appreciation.
The precious metal showed some resilience below the $5,100 mark on Tuesday, which represents a key horizontal resistance breakpoint and should act as a key pivotal point. The subsequent move up, meanwhile, favors bullish traders and suggests that the path of least resistance for the Gold price is to the upside. The positive outlook is reaffirmed by the fact that the XAU/USD pair holds comfortably above the rising 200-period Moving Average (Simple Moving Average), which tracks near $4,930 and underpins the broader uptrend.
XAU/USD 4-hour chart
Gold bulls have the upper hand while above the $5,100 horizontal resistance-turned-support
Momentum has cooled from overbought territory, yet the Relative Strength Index (14) stabilizes around 62, keeping upside pressure in place rather than signaling a deeper correction. The Moving Average Convergence Divergence (MACD) (12, 26, 9) has retreated from recent highs and flattens with shrinking positive readings, which suggests a consolidation phase within an overall positive structure rather than a completed top.
On the upside, immediate resistance stands around $5,215, the latest reaction high, with a break above this level opening the way toward $5,240 as the next bullish target. As long as price holds above $5,150 initial support, dips are likely to be treated as corrective within the prevailing uptrend.
Meanwhile, initial support emerges near $5,100. A sustained break below $5,100 would expose a deeper layer near the $5,050 region, where buyers would be expected to defend the broader bullish bias.
(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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