Gold (XAU/USD) continues its sideways consolidation price move during Tuesday’s Asian session and remains near the all-time high reached the previous day amid mixed fundamentals. The US dollar (USD) is attracting some buyers and recouping some of its overnight decline from its highest level since December 9 on lower bets on two more interest rate cuts by the Federal Reserve (Fed). Moreover, civil unrest in Iran appears to have abated, reducing the likelihood of U.S. intervention and proving to be another factor hindering sales of this commodity.
However, the prolonged Russia-Ukraine war keeps geopolitical risks in play. Moreover, concerns about a possible trade war between the United States and Europe amid rising tensions over Greenland continue to weigh on investor sentiment and provide support for safe-haven gold. Traders also seem reluctant, preferring to wait for Thursday’s release of the US Personal Consumption Expenditures (PCE) price index. Key data will provide more clues about the Fed’s future policy path, which in turn will drive the USD and provide fresh impetus to the underperforming yellow metal.
Market Overview: Gold Maintains Bullish Bias Amid Global Flight To Safety
- US President Donald Trump appears to have backed down from his earlier threats to take military action against Iran over Tehran’s brutal crackdown on protests. This, along with the emergence of US dollar purchases, keeps the gold price below its all-time high and the $4,700 level during Tuesday’s Asian session.
- Traders tempered their view on more aggressive easing by the U.S. Federal Reserve in 2026 after Trump said he would prefer to keep National Economic Council director Kevin Hassett in his current position. This suggests that someone else will replace outgoing Fed Chairman Jerome Powell, who is the backbone of the USD.
- Russia carried out a series of drone attacks on Ukraine’s energy infrastructure on Monday, causing widespread power outages across the country amid freezing temperatures and high demand. Russian forces also launched a combined drone and missile attack on the Ukrainian capital of Kiev early Tuesday morning.
- Over the weekend, Trump threatened to impose an additional 10% tariffs on goods imported from eight European countries from February 1 that would stand in his way of taking over Greenland. France has proposed a series of previously untested economic countermeasures in response, increasing the risk of a trade war between the US and the EU.
- Investors are now eagerly awaiting Thursday’s release of the U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation. It will be accompanied by the final third-quarter U.S. GDP report, which will provide more clues about the path of the Fed’s rate cuts, which in turn should impact the non-interest-bearing commodity.
Gold needs to overcome the resistance of the rising channel to support this cause for additional gains
The ascending channel from $3,845.01 marks progress. The moving average divergence (MACD) line extends above the signal line, with both being above zero, reinforcing the bullish bias. A widening positive histogram suggests that buyers remain in control. An RSI of 70.95 is overbought and momentum looks stretched. Resistance coincides with the upper boundary of the channel near USD 4,709.61.
Failure to specify this limit may result in consolidation or rollbacks in the channel. The channel’s support is close to $4,401.47. A decline in the MACD histogram would indicate weakening momentum, while a moderation in the RSI due to overbought would ease upside pressure. A sustained break above the upper band could extend the uptrend, while declines can be expected to continue towards the lower band.
(The technical analysis for this story was written with the lend a hand of an AI tool.)
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 safe and sound 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 support 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 forceful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
