- Gold price continues to attract safe-haven flows amid trade jitters and geopolitical risks.
- Bets that the Fed will cut rates several times this year further benefit the yellow metal.
- A modest USD bounce and the risk-on mood might cap the upside for the XAU/USD pair.
Gold price (XAU/USD) scales higher for the second straight day – also marking its fifth day of a positive move in the previous six – and hits a fresh record high, around the $3,010 region during the Asian session on Tuesday. Against the backdrop of the uncertainty over US President Donald Trump’s trade tariffs and US recession fears, the risk of a further escalation of tensions in the Middle East fuels safe-haven demand and acts as a tailwind for the bullion. Adding to this, growing expectations of more rate cuts by the Federal Reserve (Fed), bolstered by unimpressive consumer spending data released on Monday, further underpin the non-yielding yellow metal.
It, however, remains to be seen if bulls are able to maintain their dominant position amid the risk-on mood, which remains well supported by the optimism over China’s stimulus measures and tends to dent demand for the Gold price. Meanwhile, the US Dollar (USD) recovered slightly from a five-month low on the back of some repositioning trade ahead of a two-day FOMC policy meeting starting this Tuesday. This might further contribute to capping the upside for the commodity. Traders might also opt to move to wait for the highly-anticipated Fed decision on Wednesday before positioning for the next leg of a directional move for the precious metal.
Daily Digest Market Movers: Gold price continues to draw support from a combination of factors
- The Israel Defense Forces (IDF) said it is carrying out “extensive strikes” in the Gaza Strip and targeting what it called “terror targets” belonging to Hamas. This comes after talks to extend the Gaza ceasefire failed to reach an agreement at meetings in Qatar, raising the risk of further escalation of geopolitical tensions in the region.
- Concerns about the economic slowdown resurfaced after US Treasury Secretary Scott Bessent said on Sunday there were no guarantees that the U.S. economy will avoid recession this year. This further underpins demand for traditional safe-haven assets and lifts the Gold price to a fresh all-time peak during the Asian session on Tuesday.
- On the economic data front, the US Census Bureau reported on Monday that US Retail Sales rose by 0.2% in February vs the downwardly revised decline of 1.2% the prior month. The reading fell short of expectations for a 0.7% growth, signaling consumer caution and lifting bets that the Federal Reserve will resume its rate-cutting cycle.
- The Fed funds futures suggest that the US central bank could lower borrowing costs by 25 basis points each at the June, July, and October monetary policy meetings. This might cap the attempted US Dollar recovery from its lowest level since October 2024 touched on Monday and is further seen acting as a tailwind for the non-yielding yellow metal.
- Meanwhile, US President Donald Trump expressed optimism that Russia and Ukraine will be able to come to a ceasefire and ultimately a peace deal. This comes ahead of the Trump-Putin peace talks on Tuesday, which, along with the optimism led by China’s stimulus measures announced over the weekend, remains supportive of the upbeat market mood.
- Traders now look to Tuesday’s US economic docket – featuring the release of Building Permits, Housing Starts, and Industrial Production data. The focus, however, will remain glued to the outcome of a two-day FOMC meeting on Wednesday, which will drive the USD demand in the near term and provide a fresh directional impetus to the XAU/USD pair.
Gold price needs to consolidate before the next leg up amid slightly overbought daily RSI
From a technical perspective, acceptance above the $3,000 psychological mark could be seen as a fresh trigger for bullish traders. That said, the daily Relative Strength Index (RSI) on the daily chart has started flashing slightly overbought conditions. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of the recent well-established uptrend witnessed over the past three months or so.
Meanwhile, any corrective slide below the $2,980-2,978 immediate support could be seen as a buying opportunity and remain limited near the $2,956 resistance breakpoint. A convincing break below the latter, however, might prompt some technical selling and drag the Gold price to the $2,930-2,928 horizontal zone en route to the $2,900 round figure and last week’s swing low, around the $2,880 region.
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.