Gold consolidates around $5,000; eyes US GDP and PCE data for fresh impetus
- Gold bulls turn cautious ahead of the release of the US Q4 GDP and the PCE Price Index.
- Receding Fed rate cut bets continue to underpin the USD and cap the precious metal.
- Rising geopolitical tensions act as a tailwind for the commodity ahead of the US data.
Gold (XAU/USD) struggles to capitalize on its modest gains registered over the past two days and oscillates in a narrow trading band, around the $5,000 psychological mark during the Asian session on Friday. Traders now seem reluctant and opt to wait for the key US macro releases – the Advance Q4 GDP report and the Personal Consumption Expenditures (PCE) Price Index – before placing fresh directional bets. The crucial data will play a key role in influencing expectations about the US Federal Reserve's (Fed) rate cut path, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the non-yielding yellow metal.
Meanwhile, Minutes from the January FOMC monetary policy meeting showed that the central bank is in no hurry to cut interest rates further, while officials also discussed the possibility of raising rates if inflation does not cool. Moreover, the incoming data signaled a remarkably resilient US labor market, which, along with hawkish comments from Fed officials, forced investors to pare their bets for more aggressive policy easing. The market repricing of Fed rate cuts, in turn, pushed the USD to its highest level since January 23 and turned out to be a key factor acting as a headwind for the Gold, though the downside seems limited amid rising geopolitical tensions.
US President Donald Trump warned Iran on Thursday that it must make a deal over its nuclear program, or really bad things will happen, and set a deadline of 10 to 15 days. In response, Iran told UN Secretary-General, Antonio Guterres, that it does not seek war but will not tolerate military aggression. Iran added that all bases and assets of a hostile force in the region would be legitimate targets if attacked. This raises the risk of a military confrontation and a broader conflict in the Middle East, which might continue to underpin the safe-haven Gold. The mixed fundamental backdrop, in turn, warrants caution before placing aggressive directional bets.
XAU/USD 1-hour chart
Gold needs to break out of a short-term range to back the case for further gains
The XAU/USD pair on Thursday defended and bounced off the 100-hour Simple Moving Average (SMA). That said, the lack of follow-through buying and the range-bound price action witnessed over the past two days or so warrants caution for bullish traders. The SMA currently sits at $4,965.41, offering nearby dynamic support.
Meanwhile, the Moving Average Convergence Divergence (MACD) line remains below the Signal line and below zero, while the negative histogram contracts, hinting at fading bearish pressure. The Relative Strength Index (RSI) stands at 53 (neutral), aligning with a tentative recovery tone.
Holding above the rising 100-period SMA would keep intraday risks skewed to the upside, and a MACD bull crossover with a drive back above the zero line would strengthen the case for continuation. Conversely, a loss of momentum on MACD alongside an RSI rollover from the mid-50s would leave the recovery vulnerable and could see price retest the moving average as support before direction reasserts.
(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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