Gold climbs to fresh monthly high on trade war fears, geopolitical risks, weaker USD
- Gold prolongs its uptrend for the fourth straight day and draws support from a combination of factors.
- Trade-related uncertainties and rising geopolitical tensions underpin demand for the safe-haven bullion.
- Fed rate cut bets and a broadly weaker USD provide an additional boost to the non-yielding commodity.
Gold (XAU/USD) registered its highest-ever weekly close, above the $5,100 mark on Friday, and gains strong follow-through traction at the start of a new week. This also marks the fourth straight day of a positive move and lifts the commodity beyond the $5,150 level, or a fresh monthly peak, during the Asian session. Renewed trade-war fears, along with rising geopolitical tensions in the Middle East, continue to drive safe-haven flows toward the precious metal.
US President Donald Trump announced a new framework following a Supreme Court verdict against his sweeping tariffs and imposed a new global levy of 15% – the maximum allowed under the statute – on items imported into America. This, in turn, fueled concerns about retaliatory measures and potential economic fallout from disruptions to global supply chains, weighing on the risk sentiment and strengthening demand for the Gold as a defensive asset.
Meanwhile, data released on Friday showed that the US Personal Consumption Expenditures (PCE) Price Index increased 2.9% over the 12 months through December. Furthermore, the core gauge, which excludes the volatile food and energy components, advanced 3.0% YoY, reaffirming bets that the US Federal Reserve (Fed) would not cut rates in March. However, traders are still pricing in the possibility of two 25-basis-point (bps) rate cuts by the Fed this year.
The expectations were lifted by a weak US GDP print, which showed that the economy grew by a 1.4% annualized pace in the fourth quarter, marking a sharp deceleration from the 4.4% rise in Q3, amid the longest-ever US government shutdown. This, along with trade uncertainties, drags the US Dollar (USD) away from its highest level since January 23, touched last week, and turns out to be another factor providing an additional boost to the non-yielding Gold.
Furthermore, the risk of a military conflict between the US and Iran contributes to the precious metal's move higher. Negotiators from the US and Iran are poised to meet in Geneva on Thursday following the submission of a detailed nuclear proposal by Iran. Reports suggest that US President Donald Trump is considering a potential military strike against Iran in the coming days and could pursue a larger assault later if diplomacy fails to curb Tehran’s nuclear ambitions.
XAU/USD 4-hour chart
Gold bulls have the upper hand as Friday’s breakout above $5,100 remains in play
From a technical perspective, the strong follow-through move up at the start of the new week validates last Friday's breakout above the $5,100 mark horizontal resistance and favors the XAU/USD bulls. Moreover, the Moving Average Convergence Divergence (MACD) line extends above the Signal line and stands above zero. The histogram widens on the positive side, signaling strengthening bullish momentum.
Adding to this, the precious metal holds above the rising 200-period Exponential Moving Average (EMA), supporting the advance. The upward slope of this average keeps the short-term bias tilted higher. That said, the Relative Strength Index (RSI) at 73.23 is overbought and could limit immediate follow-through.
Above the rising 200-period EMA at $4,864.04, the bias stays positive, and pullbacks could remain contained while that gauge holds. MACD remains above the Signal line and the zero mark, and momentum would soften if the histogram begins to contract. With RSI at 73.23, overbought conditions warn of a pause, and a cooling phase could unfold before trend continuation. As long as price holds over the 200-period EMA, the broader rebound tone would remain intact even amid consolidation.
(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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