Gold advances but remains on track for weekly decline
- Gold rises but heads for a weekly loss as traders trim bets on Fed rate cuts.
- Dollar-denominated Gold faces pressure as the US Dollar gains on potential Fed rate hikes.
- Iran war entered its seventh day as Tehran launched missiles and drones across the Gulf, while Israel struck Tehran.
Gold price (XAU/USD) recovers its recent losses from the previous session on Friday. The yellow metal advances as the broader precious metals market rebounds on safe-haven demand. However, the yellow metal is on track for its first weekly decline in five weeks as escalating Middle East tensions push oil prices higher, fueling inflation concerns and reducing bets on Federal Reserve rate cuts.
The dollar-denominated Gold faces challenges as the US Dollar (USD) strengthens, as Federal Reserve (Fed) officials continue to consider the possibility of further rate hikes if inflation remains above target. It is worth noting that a weaker US Dollar makes the precious metal cheaper for buyers with foreign currencies, boosting demand.
The US-Israeli conflict with Iran entered its seventh day, with Iran launching missiles and drones across the Gulf on Thursday, striking an oil refinery in Bahrain, while Israel continued airstrikes on Tehran, and the US suspended operations at its embassy in Kuwait.
US President Donald Trump said that Iranian officials reached out to him in an attempt to reach an agreement to end the war, but he insisted it was too late and that the US is pushing to destroy Iran.
Iranian Foreign Minister Abbas Araghchi said Tehran has not sought a ceasefire and has no intention of negotiating, while Iran’s Islamic Revolutionary Guard Corps warned that retaliatory strikes would intensify in the coming days.
Traders await US labor data, including US Nonfarm Payrolls (NFP), where consensus expectations are around 59K for February, following January’s above-trend reading of 130K. Additionally, Retail Sales are expected to fall 0.3% month-over-month in January, after a flat reading in the previous month.
The US is also set to introduce a temporary 15% global tariff this week, replacing the 10% rate enacted after the Supreme Court of the United States struck down most of the earlier levies imposed by Donald Trump. Scott Bessent said the tariff could revert to previous levels within five months as new trade investigations move forward.
Gold tests nine-day EMA barrier near $5,150
Gold price (XAU/USD) is trading around $5,130 at the time of writing. The technical analysis of the daily chart suggests an ongoing bullish bias as the metal price remains within the ascending channel pattern.
The near-term bias is mildly bullish as price holds above the rising 50-day Exponential Moving Average (EMA) and continues to respect the cluster of recent highs rather than extending the prior correction. The nine-day EMA flattens just above the spot, indicating moderating but still bearish short-term momentum. Additionally, the 14-day Relative Strength Index (RSI) at 53 stays above its midline, showing underlying buying pressure remains intact.
The XAU/USD pair is testing the immediate barrier at the nine-day EMA of $5,140. A break above the short-term average and support the pair to approach the upper boundary of the ascending channel at $5,480, followed by the all-time high of $5,598, reached on January 29. On the downside, the initial support lies at the lower boundary of the channel at $5,080. A break below the channel would expose the 50-day EMA at $4,883.
(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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