Gold holds steady near record high as safe-haven demand counters USD uptick
- Gold is seen oscillating in a narrow band near the record high amid mixed fundamental cues.
- A USD uptick caps the precious metal amid reduced bets for two more Fed rate cuts this year.
- Persistent geopolitical uncertainties and trade war fears act as a tailwind for the commodity.
Gold (XAU/USD) extends its sideways consolidative price move through the Asian session on Tuesday and remains close to the all-time peak touched the previous day amid mixed fundamental cues. The US Dollar (USD) attracts some buyers and recovers a part of the overnight pullback from its highest level since December 9 amid reduced bets for two more interest rate cuts by the Federal Reserve (Fed). Furthermore, civil unrest in Iran seems to have subsided, reducing the likelihood of a US intervention and turning out to be another factor acting as a headwind for the commodity.
However, the protracted Russia-Ukraine war keeps geopolitical risks in play. Adding to this, concerns about a possible trade war between the US and Europe, amid rising tensions over Greenland, continue to weigh on investors' sentiment and offer support to the safe-haven Gold. Traders also seem reluctant and opt to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index on Thursday. The crucial data would offer more cues about the Fed's future policy path, which, in turn, will drive the USD and provide a fresh impetus to the non-yielding yellow metal.
Daily Digest Market Movers: Gold retains bullish bias amid the global flight to safety
- US President Donald Trump seems to have stepped back from his earlier threats of military action against Iran on the back of Tehran’s brutal crackdown on protests. This, along with the emergence of some US Dollar buying, keeps the Gold below the all-time peak and the $4,700 mark through the Asian session on Tuesday.
- Traders trimmed their bets for more aggressive policy easing by the US Federal Reserve in 2026 after Trump said that he would prefer to keep National Economic Council director Kevin Hassett in his current role. This suggests that someone else will succeed the outgoing Fed Chair Jerome Powell, which underpins the USD.
- Russia launched a barrage of drone strikes on Ukraine's energy infrastructure overnight on Monday, triggering widespread power outages across the country amid freezing temperatures and high demand. Russian forces also launched a combined drone and missile attack on the Ukrainian capital of Kyiv early on Tuesday.
- Trump threatened over the weekend that he would impose additional 10% levies from February 1 on goods imported from eight European nations that stand in his way to acquire Greenland. France proposed responding with a range of previously untested economic countermeasures, raising the risk of a US-EU trade war.
- Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge – on Thursday. This will be accompanied by the final US Q3 GDP report and offer more cues about the Fed's rate-cut path, which, in turn, should influence the non-yielding commodity.
Gold needs to clear ascending channel resistance to back the case for additional gains
An ascending channel from $3,845.01 frames the advance. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, reinforcing a bullish bias. The widening positive histogram suggests buyers retain control. RSI at 70.95 is overbought, and momentum looks stretched. Resistance aligns with the channel’s upper boundary near $4,709.61.
Failure to clear that cap could trigger consolidation or a pullback within the channel. Channel support stands near $4,401.47. A contraction in the MACD histogram would hint at fading momentum, while a moderation in RSI from overbought would ease upside pressure. A sustained break above the upper boundary could extend the uptrend, whereas dips would be expected to hold on approaches to the lower 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.
Recommended Articles
