Gold rises above $4,600 as Fed rate cut bets, safe-haven demand grow
- Gold rebounds toward the record high of $4,634.64 reached on Tuesday.
- The non-interest-bearing Gold attracts buyers as softer US inflation fuels growing bets on Fed rate cuts.
- The XAU/USD gains ground as geopolitical risks favor safe-haven demand.
Gold (XAU/USD) rebounds toward the record high of $4,634.64 reached in the previous session, trading around $4,620.00 per troy ounce on Wednesday. Precious metals, including Gold, attract buyers amid growing bets on Federal Reserve (Fed) rate cuts following the softer inflation in the United States (US).
US inflation data for December signaled easing underlying US inflation, strengthening views that price pressures are gradually cooling. Rate futures showed investors divided between expectations of two or three Fed rate cuts this year, well above policymakers’ median projection of one.
Gold prices found support as safe-haven demand strengthened amid renewed concerns over the Fed’s independence after US prosecutors opened a criminal probe linked to Chair Powell’s June testimony. Geopolitical risks also remained elevated, with markets closely watching the possibility of US involvement in Iran’s political unrest following repeated warnings of potential military action.
Daily Digest Market Movers: Gold remains stronger as US Dollar weakens
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is edging lower after registering modest gains in the previous session. The DXY is trading around 99.10 at the time of writing, supporting dollar-denominated Gold by boosting demand from foreign-currency buyers.
- US Core Consumer Price Index (CPI), excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held at 2.6%, matching a four-year low. The data provided a clearer sign of easing inflation after earlier releases were skewed by shutdown effects. Meanwhile, CPI increased by 0.3% month-over-month in December 2025, matching market expectations and repeating the rise seen in September. The annual inflation remains at 2.7% increase as expected.
- President Trump said on Monday that he would impose 25% tariffs on goods from any country doing business with Iran, stepping up pressure on Tehran amid widespread domestic protests. He added that the measure would take effect immediately, without providing further details. Trump warned on Sunday that action may be required before any meeting, even as he said Iran’s leadership had reached out seeking “to negotiate” after his military threats.
- US federal prosecutors threatened to indict Fed Chair Jerome Powell over his comments to Congress regarding a building renovation project, raising questions about the central bank’s independence. The Trump administration has been pressuring the Fed to cut interest rates, with Powell calling the threat a “pretext” to influence policy.
- US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000. However, the Unemployment Rate ticked lower to 4.4% in December from 4.6% in November, while the Average Hourly Earnings climbed to 3.8% YoY in December from 3.6% in the previous reading.
- Richmond Fed President Tom Barkin said the decline in the unemployment rate was welcome and described job growth as modest but stable. Barkin added that it is difficult to find firms outside healthcare or AI that are hiring and said it remains unclear whether the labor market will tilt toward more hiring or more firing.
Gold technical setup warns potential bearish reversal as ascending wedge emerges
Gold (XAU/USD) is trading around $4,620 on Wednesday. The technical analysis of the daily chart suggests the XAU/USD pair remains within an emerging ascending wedge pattern, signaling weakening upside momentum and warning of a potential bearish reversal if the price breaks below the lower trendline with strong volume.
The nine-day Exponential Moving Average (EMA) stands above the 50-day EMA, confirming a well-defined bullish bias. Gold price holds above the faster average, and the 50-day slope continues to advance, underscoring medium-term upside pressure. The 14-day Relative Strength Index (RSI) at 71.39 is overbought, flagging stretched momentum even as the trend stays intact.
The immediate resistance appears at the record high of $4,634.64, reached on December 13, aligned with the upper boundary of the ascending wedge. A break above this confluence resistance zone would lead the XAU/USD pair to target $4,650 level. On the downside, the initial support lies at the nine-day EMA of $4,520.01, followed by the lower ascending wedge boundary around $4,470.00.
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.
(The technical analysis of this story was written with the help of an AI tool.)
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