Gold record-setting rally remains uninterrupted for fifth day amid Fed rate cut bets
- Gold continues scaling new all-time highs for the fifth consecutive day on Friday.
- The move up seems rather unaffected by easing US-EU tensions over Greenland.
- Fed rate cut bets keep the USD depressed and offer support to the commodity.
Gold (XAU/USD) prolongs its weekly uptrend and advances to a fresh all-time peak, around the $4,967 region, during the Asian session on Friday. The commodity remains on track to register strong weekly gains despite easing geopolitical tensions following US President Donald Trump's U-turn on Greenland. In fact, Trump pulled back from his threat to slap additional tariffs on eight European nations and ruled out seizing Greenland by force. This, in turn, remains supportive of the upbeat market mood, which tends to undermine demand for traditional safe-haven assets, albeit it does little to dent the strong bullish sentiment surrounding the bullion.
Meanwhile, the US Dollar (USD) attracts some buyers and recovers a part of the overnight slump back closer to a two-week low. This, along with extremely overbought conditions on short-term charts and the upbeat mood across the global equity markets, might hold back traders from placing fresh bullish bets around the safe-haven Gold. Any meaningful USD appreciation seems elusive in the wake of bets for at least two more interest rate cuts by the US Federal Reserve (Fed). This, in turn, should continue to act as a tailwind for the non-yielding yellow metal, suggesting that corrective pullbacks are more likely to be bought into and remain limited.
Daily Digest Market Movers: Gold buying remains unabated as dovish Fed expectations offset easing geopolitical tensions
- US President Donald Trump pulled back from his tariff threats and said on Wednesday that he had reached an agreement on a framework for a future deal on Greenland with NATO. The relief spurred a follow-through rally on Wall Street, and the spillover effect buoyed Asian equities on Friday.
- The US Bureau of Economic Analysis published the final reading of third-quarter Gross Domestic Product, which showed that the economy expanded by 4.4%, slightly better than the second estimate of 4.3%. The reading was also well above the 3.8% growth recorded in the previous quarter.
- A separate report revealed that the US Core Personal Consumption Expenditures Price Index – the Federal Reserve's preferred gauge of inflation – rose 2.8% YoY in November from 2.7% in the previous month. On a monthly basis, the gauge maintained a steady growth and recorded a 0.2% increase.
- Adding to this, the US Department of Labor reported that initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 200,000 for the week ended January 17. The print was lower than consensus estimates for a reading of 212K, though it failed to impress the US Dollar bulls.
- Investors seem convinced that the Fed will hold its key interest rate through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May. The markets, however, are still pricing in the possibility of two more rate reductions in 2026, which continues to weigh on the USD.
- The USD Index, which tracks the Greenback against a basket of currencies, remains on track to register heavy weekly losses, reversing a major part of its gains since the beginning of 2026. This, in turn, continues to benefit the Gold and backs the case for an extension of the recent record-setting rally.
- The market focus now shifts to a two-day FOMC policy meeting, starting next Tuesday. Investors will look for cues about the Fed's rate-cut path, which will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the non-yielding yellow metal.
Gold needs to consolidate before the next leg up amid extremely overbought daily RSI
This week's breakout through the top end of an ascending channel extending from late October was seen as a key trigger for the XAU/USD bulls and validates the near-term positive outlook. The Moving Average Convergence Divergence (MACD) line stands above the Signal line, with both above zero, and the positive histogram widens, suggesting strengthening bullish momentum. The RSI at 81.11 is overbought and could cap gains near term, even as the breakout favors upside continuation.
Momentum remains firm, but stretched conditions raise the risk of a pullback toward the channel floor at $4,437.46 should buyers fade. The MACD stays in positive territory and above the Signal line; a contracting histogram would hint at waning momentum and a corrective phase. RSI holds above 70, reinforcing an overbought profile that could trigger a pause before the broader uptrend resumes as long as price holds above former channel resistance.
(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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