Gold consolidates below $5,200 as Fed outlook counter geopolitical risks
- Gold extends its sideways consolidative price move through the Asian session on Friday.
- Geopolitical risks and trade uncertainties continue to act as a tailwind for the XAU/USD.
- Reduced Fed rate cut bets offer support to the USD and cap the non-yielding commodity.
Gold (XAU/USD) struggles to capitalize on its modest gains registered over the past two days and oscillates in a narrow trading band below the $5,200 mark, during the Asian session on Friday. Geopolitical risks remain in play amid a huge American naval and air power buildup in the Middle East. Moreover, US President Donald Trump laid out the case for a possible attack on Iran in his State of the Union speech and said on Tuesday that he would not allow the world's biggest sponsor of terrorism to have a nuclear weapon. This, along with persistent trade-related uncertainties, acts as a tailwind for the precious metal.
The US moved ahead with a 10% tariff on all non-exempt goods, the rate initially announced by Trump on Friday, following the Supreme Court verdict against his sweeping tariffs rather than the 15% he promised a day later. However, a White House official said the administration is working to raise levies to 15%, fueling worries about retaliatory measures and the economic fallout from disruptions to global supply chains. Given Trump's mercurial turns over tariffs, the anxiety over how long this rate will continue keeps investors on edge and turns out to be another factor that underpins the traditional safe-haven Gold.
Meanwhile, traders trimmed their bets for more aggressive policy easing by the US Federal Reserve (Fed) after minutes from the January FOMC meeting showed that the central bank is in no hurry to cut interest rates further. Moreover, officials discussed the possibility of raising rates if inflation does not cool. This keeps the US Dollar (USD) well within striking distance of the monthly peak and caps the upside for the non-yielding Gold. Furthermore, the US and Iran agreed to more nuclear talks, easing concerns about potential hostilities. This contributes to keeping a lid on the commodity and warrants caution for bulls.
The market focus now shifts to the release of the US Producer Price Index (PPI), due later during the North American session. Apart from this, speeches by influential FOMC members will play a key role in driving the USD demand and providing some impetus to the Gold heading into the weekend. Nevertheless, the XAU/USD pair remains on track to register gains for the fourth week in a row, and the broader fundamental backdrop suggests that any corrective pullback is more likely to be bought into.
XAU/USD 1-hour chart
Gold remains confined in a multi-day range, above the 100-hour SMA pivotal support
The range-bound price action witnessed over the past three days or so constitutes the formation of a rectangle pattern on intraday charts. Meanwhile, the Gold holds above the rising 100-hour Simple Moving Average (SMA) near $5,176, keeping the short-term uptrend structure intact despite repeated intraday pullbacks. The Relative Strength Index (RSI) hovers just below 50, reflecting balanced momentum but not signaling downside pressure. The Moving Average Convergence Divergence (MACD) indicator remains slightly above the zero line, with the MACD line still over the signal line, which reinforces a modest upside tone rather than a momentum-driven rally.
Initial resistance emerges at the recent hourly highs around $5,195, where prior advances stalled, and intraday sellers reappeared. A convincing break above this barrier would open the way toward the next upside area near $5,210, where the latest upward leg would begin to look extended. On the downside, immediate support stands at the 100-hour SMA around $5,176, with a sustained drop below this level exposing deeper support at $5,165, aligned with recent closing lows and the lower end of the latest consolidation band.
(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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