Gold jumps to record highs amid Fed turmoil and rising geopolitical risks
- Gold surges to fresh record highs as concerns over Fed independence fuel safe-haven demand.
- Fed Chair Jerome Powell's investigation and rising geopolitical risks keep markets on edge.
- Technically, Gold remains in a strong uptrend, posting higher highs and higher lows on the daily chart.
Gold (XAU/USD) kicks off the week with strong upward momentum, surging to fresh record highs near the $4,600 psychological mark as renewed concerns over Federal Reserve (Fed) independence fuel broad risk aversion. At the time of writing, XAU/USD trades around $4,583, up nearly 1.70% on the day.
Market sentiment has been shaken by an unprecedented development in the United States (US), where prosecutors have launched a criminal investigation into Fed Chair Jerome Powell.
The rising political pressure on the Fed undermines confidence in US monetary policy and weighs on the US Dollar (USD), while supporting Gold amid growing economic uncertainty.
At the same time, persistent geopolitical tensions continue to drive safe-haven flows into Bullion. Investors are closely monitoring nationwide protests in Iran, renewed US-Greenland rhetoric, and ongoing developments involving Venezuela.
Looking ahead, the focus this week turns to US economic data, with the Consumer Price Index (CPI) due on Tuesday, followed by Retail Sales and the Producer Price Index (PPI) on Wednesday, alongside a heavy slate of Fed speakers throughout the week.
Market movers: Geopolitical risks and Fed turmoil keep investors cautious
- The US Department of Justice (DoJ) issued grand jury subpoenas on Friday as part of a criminal investigation focused on Fed Chair Jerome Powell, linked to his Senate testimony on the Fed’s $2.5 billion headquarters renovation project.
- Chair Jerome Powell said in a video statement late Sunday that the DOJ action is politically motivated, stressing that it “is not about my testimony last June or about the renovation of the Federal Reserve buildings,” adding that those explanations “are pretexts.” Powell said the issue is whether the Fed can continue to set interest rates “based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
- On Sunday, US President Donald Trump threatened possible military action against Iran amid rising unrest and a mounting death toll. In response, Tehran warned it would target US army bases if Washington follows through on renewed threats to strike the country in support of protesters.
- US Secretary of State Marco Rubio is set to meet with Danish and Greenland officials this week as President Donald Trump doubles down on plans to acquire Greenland.
- Last week’s US labour-market data eased fears of a sharp deterioration in employment conditions and tempered expectations for a near-term Fed rate cut. However, traders continue to price in around two cuts later this year. The US economy added 50,000 jobs in December, below expectations for a 60,000 increase, but the softer headline was partly offset by a drop in the Unemployment Rate to 4.4% from 4.6%.
Technical analysis: Bulls stay in control as Gold trades at record levels
From a technical perspective, XAU/USD remains in a well-defined uptrend, extending gains into uncharted territory after last year’s historic rally.
The daily chart shows a clear sequence of higher highs and higher lows since prices bottomed near the $4,000 area in October, following a brief corrective pullback from the previous record high.
Trend conditions remain constructive, with moving averages continuing to slope higher. The 21-day Simple Moving Average (SMA) provides dynamic support near $4,403.
That said, near-term pullback risks are rising, as the Relative Strength Index (RSI) hovers close to overbought territory and shows early signs of bearish divergence.
On the downside, initial support is seen around the $4,500 psychological level. On the upside, bulls are eyeing a sustained break above $4,600, which could open the door toward the $4,700 region. The Average Directional Index (ADX) near 30 signals that the broader trend remains strong.
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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