Gold rises as geopolitical risks underpin safe-haven demand; USD strength limits gains
- Gold attracts some safe-haven flows on Tuesday amid persistent geopolitical uncertainties.
- Inflation concerns dim Fed rate cut bets, underpinning USD and capping the yellow metal.
- The recent range-bound price action warrants caution before placing fresh directional bets.
Gold (XAU/USD) builds on the overnight goodish rebound from the vicinity of the $5,000 psychological mark and attracts some follow-through buying during the Asian session on Tuesday. Iranian officials dismissed US President Donald Trump’s remarks that the Middle East conflict will end soon as nonsense and warned that regional security would either exist for everyone or for no one. Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that Tehran, not Washington, will determine when the war ends. This keeps geopolitical risks in play and helps revive demand for the safe-haven precious metal.
Meanwhile, Crude Oil prices regain positive traction following the previous day's dramatic turnaround from the highest level since June 2022 amid worries about potential disruptions in supplies due to the closure of the Strait of Hormuz. Investors remain worried that a sustained increase in energy prices would drive up inflation and prompt the US Federal Reserve (Fed) to delay rate cuts. This, in turn, remains supportive of elevated US Treasury bond yields, which assists the US Dollar (USD) to stall the overnight retracement slide from a three-month peak and keeps the non-yielding Gold below the $5,200 mark.
The mixed fundamental backdrop warrants some caution before placing aggressive bullish bets on the XAU/USD pair, as traders now look forward to the US inflation figures for a fresh impetus. The US Consumer Price Index (CPI) is due for release on Wednesday and will be followed by the US Personal Consumption Expenditure (PCE) Price Index on Friday. The crucial data will play a key role in influencing Fed rate-cut expectations and drive the USD demand, which, in turn, should provide a fresh impetus to the Gold. The focus, however, remains on developments surrounding the US-Israel war with Iran.
XAU/USD 4-hour chart
Gold needs to break out through trading range barrier to back the case for additional gains
From a technical perspective, the XAU/USD pair has been oscillating in a range over the past week or so and finding some support ahead of the rising 200-period Exponential Moving Average (EMA) on the 4-hour chart. The latter is pegged at around $5,010, which coincides with the lower end of the trading range and should act as a key pivotal point for short-term traders.
The Moving Average Convergence Divergence (MACD) line has turned positive and extends above its signal line, with a growing positive histogram that suggests strengthening upside momentum after the recent consolidation. The Relative Strength Index hovers just above 50, reinforcing the idea of emerging bullish pressure rather than overextended conditions.
Moreover, the near-term bias seems tilted mildly bullish as the Gold price holds above the $5,010 confluence, keeping the broader uptrend structure intact. Initial support appears at the recent swing area near $5,140, with a deeper floor at the 200-period EMA on the 4-hour chart.
On the topside, immediate resistance comes in around the late-swing highs near $5,190, where prior rejection capped advances, followed by a higher barrier at $5,230 if buyers extend the move. A sustained hold above $5,140 would keep the bullish bias in play, while a break below $5,010 would weaken the upward outlook and shift focus back toward a corrective phase.
(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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