Gold sticks to gains above $4,400 as geopolitical tensions offset notable USD strength
- Gold rallies on Monday as rising geopolitical tensions boost demand for safe-haven assets.
- Bets for more interest rate cuts by the US Fed also benefit the non-yielding yellow metal.
- The ongoing USD recovery does little to hinder the XAU/USD pair’s intraday positive move.
Gold (XAU/USD) gains strong positive traction at the start of a new week and climbs further beyond the $4,400 mark during the Asian session amid the global flight to safety. Geopolitical tensions escalated after the US launched land strikes on Venezuela, leading to the capture of its President, Nicolás Maduro, and his wife. Furthermore, US President Donald Trump's confrontational rhetoric toward Colombia and Mexico raised concerns about regional instability in Latin America, boosting demand for the traditional safe-haven commodity.
Apart from this, prospects for more interest rate cuts by the US Federal Reserve (Fed) later this year turn out to be another factor driving flows toward the non-yielding Gold. Meanwhile, rising geopolitical tensions benefit the US Dollar's (USD) status as the global reserve currency. A firmer USD, however, does little to dent the intraday bullish sentiment surrounding the commodity. This, in turn, backs the case for a further appreciating move for the XAU/USD pair as traders now look forward to this week's key US economic releases.
Daily Digest Market Movers: Gold attracts strong safe-haven flows amid dovish Fed expectations
- The US Army's Delta Force – an elite special forces unit – attacked Venezuela and captured its President Nicolás Maduro, along with his wife, on Saturday. Furthermore, US President Donald Trump openly signaled that Colombia and Mexico could also face US action as part of a widening campaign against criminal networks and regional instability.
- This comes on top of the lack of progress in the Russia-Ukraine peace deal, unrest in Iran, and issues surrounding Gaza, which keeps geopolitical risks in play and benefits the safe-haven Gold at the start of a new week. Apart from this, dovish US Federal Reserve expectations turn out to be another factor underpinning the non-yielding yellow metal.
- Investors are pricing in the possibility that the US central bank will lower borrowing costs in March and could deliver another interest rate cut later this year. Moreover, expectations that the Trump-aligned new Fed chair will push for aggressive action overshadow the central bank's hawkish guidance of just one rate reduction by the end of this year.
- This week's release of important US macro data, including the closely-watched US Nonfarm Payrolls report on Friday, and the upcoming inflation data, will determine Fed policy trajectory. This, in turn, will play a key role in influencing the near-term US Dollar price dynamics and determining the next leg of a directional move for the commodity.
- The USD builds on its recent goodish recovery move from the lowest level since early October, touched on December 24, and rallied to a nearly four-week top. This, however, fails to hinder the XAU/USD pair's intraday move up beyond the $4,400 mark, suggesting that the path of least resistance for the bullion remains to the upside.
Gold seems poised to appreciate further as breakout through 100-hour SMA comes into play
On the 1-hour chart, the 100-period Simple Moving Average (SMA) slopes downward, keeping the broader tone cautious. The XAU/USD pair stands above this average, hinting at an intraday rebound, while the 100-SMA at $4,377.80 offers initial support. The Moving Average Convergence Divergence (MACD) histogram has flipped to positive and is widening, indicating the MACD line above the signal line and improving bullish momentum. The Relative Strength Index (RSI) sits at 63.42, firm but not overbought.
Holding above the descending 100-SMA would keep the recovery path open, while a close back below it would expose further retracement. The MACD’s positive tone suggests buyers retain the initiative and a continued expansion would favor additional gains. The RSI remains north of 60, reinforcing upward pressure; a retreat toward 50 would flag fading momentum.
(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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