Gold (XAU/USD) was slightly negative on Thursday as investors booked profits after Wednesday’s surge to a fresh record high near $4,643. At the time of writing, XAU/USD is trading around $4,586, down almost 1.0% on the day.
Meanwhile, a stronger US dollar (USD) is also holding back gold’s attempts to rally, as stronger-than-expected US data adds near-term support to the dollar. Weekly jobless claims fell to 198,000, below expectations of 215,000. Regional manufacturing data also improved, with the Empire State index rising to positive 7.7 from -3.7, while the Philadelphia Fed survey climbed to 12.6 from -8.8.
Gold’s modest decline also reflects a slight reduction in flows to sheltered havens following reports of some easing of anti-government protests in Tehran and U.S. President Donald Trump signaling that he will hold off on any immediate military action for now.
However, the broader geopolitical backdrop remains volatile, and ongoing concerns over the independence of the Federal Reserve (Fed) continue to support the metal, keeping it at record highs.
In addition to geopolitical and political risks, continued expectations for lower U.S. interest rates provide another layer of support for the underperforming metal. While recent hawkish comments from Fed officials suggest policymakers are in no rush to cut interest rates, markets continue to price in two rate cuts later this year.
Looking ahead, the focus is on comments from Fed officials as they seek fresh clues about the outlook for monetary policy.
Market drivers: geopolitical risk and Fed prospects in focus
- US President Donald Trump said on Wednesday that he had been told “from a good source” that the killings in Iran were “stopping” and that there were “no plans for executions.” Speaking to reporters in the Oval Office, Trump added that he would “watch and see” when asked whether the threat of U.S. military action was no longer a consideration.
- In an interview with Reuters, US President Donald Trump said he had no plans to fire Fed Chair Jerome Powell despite an investigation by the Justice Department. Asked whether the investigation gave him grounds to do so, Trump said the administration was “holding back” and would determine what to do, adding that it was “too early” to make any decision.
- Fed Chairman Jerome Powell is under investigation by U.S. prosecutors over his June 2025 testimony about the Fed’s headquarters renovation, which drew keen criticism from global central bankers and other Fed officials. Powell described the move as politically motivated.
- Minneapolis Fed President Neel Kashkari said Wednesday that it is “entirely likely” that inflation could remain well above the Federal Reserve’s 2% target for the next two to three years, according to an interview. New York Times. He added: “Then we have seven or eight years of increased inflation. That worries me very much.”
- Philadelphia Fed President Anna Paulson said she anticipates further interest rate cuts later this year if forecasts come true. Paulson added that inflation is expected to decline in 2026 and the labor market will stabilize, noting that the labor market is “bending but not breaking.”
- Fed President from St. Louis Alberto Musalem said on Tuesday that there was “no reason to further ease the policy in the near future” and that the policy was “well-placed to balance the risks on both sides.” He added that the latest inflation reading is encouraging and confirms the view that inflation may approach 2% this year.
Technical Analysis: XAU/USD Swing Near Record Highs
From a technical perspective, XAU/USD appears to be entering a consolidation phase near record highs, with price action capped between the $4,580-$4,640 zone. Overbought conditions discourage buyers from aggressively chasing further gains for now, even though the broader structure remains strongly bullish.
On the 4-hour chart, price is holding above the 21-period basic moving average (SMA) near $4,608, providing immediate animated support. A clear break below this level would expose the 50-period SMA at $4,528.
On the other hand, a sustained move above the $4,650 area could revive bullish momentum and open the door for a push towards the psychological $4,700 level.
Momentum signals support a pause rather than a reversal. The 4-hour relative strength index (RSI) is trading near 59, moving away from overbought territory. The moving average convergence divergence (MACD) remains below the signal line and is in negative territory, although the histogram is narrowing, suggesting confined downside and strengthening the short-term consolidation trend.
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and apply in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and sheltered haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets favor the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A sturdy dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
