Gold (XAU/USD) rose more than 1% during Friday’s North American session as the US dollar (USD) was crushed on rumors of interventions to fuel the Japanese yen (JPY) in foreign exchange markets as improved risk appetite pushed the yellow metal to fresh all-time highs of $4,988.
Bullion hits fresh record highs as edged dollar losses outweigh improving risk attitudes and stable yields
Market sentiment remains confident, but bullion prices continue to rise and the US dollar falls to its lowest level since October 2025. The US dollar index (DXY), which tracks the dollar against a basket of six currencies, is down nearly 0.50% at 97.79, after reaching a daily low of 97.70.
U.S. Treasury yields remained stable on the day, although U.S. economic data showed U.S. households were confident, according to the University of Michigan’s consumer sentiment survey.
U.S. business activity improved earlier, according to S&P Global. Still, Chris Williamson, chief business economist at S&P Global Market Intelligence, said the “concerningly weak pace of new business growth in both manufacturing and services sectors further adds to signs that first-quarter growth may disappoint.”
US GDP data for the third quarter of 2025 improved significantly and exceeded forecasts, with the economy growing 4.4% q-o-q.
Meanwhile, expectations that the Federal Reserve will cut interest rates in 2026 remain unchanged, with investors forecasting a 42.5 basis point easing in rates, according to Main Square Terminal data.
If investors continue to limit the Fed’s dovish stance, it should limit gold’s rally, which is up 15% year-to-date (YTD), less than the 39% achieved by silver since the start of 2026.
What awaits us in the US economic metrics?
Next week, investors will be paying attention to hard-wearing goods orders, the 4-week average of ADP employment changes, the Federal Open Market Committee (FOMC) monetary policy meeting, and Fed Chairman Jerome Powell’s press conference.
Daily summary of market players: gold price increases despite improved consumer sentiment
- University of Michigan consumer sentiment improved in January, hitting a five-month high of 56.4, down from a preliminary estimate of 54 and above forecasts of 54. Despite the improvement, Joanne Hsu, director of the survey, noted that consumers continue to feel pressure on purchasing power, citing elevated prices and concerns about a potential softening labor market.
- One-year inflation expectations fell to 4% from 4.2%, and five-year inflation expectations dropped from 3.4% to 3.3%.
- S&P Global data showed a moderate improvement in US business activity in January, with the preliminary Composite PMI rising to 52.8 from 52.7. However, Chris Williamson, chief business economist at S&P Global Market Intelligence, cautioned that subdued fresh business growth in manufacturing and services sectors raises the risk that first-quarter growth could be worse.
- The yield on the US 10-year Treasury bond is 4.255%. Real U.S. yields, calculated based on nominal 10-year bond yields net of inflation expectations over the same period, are rising by almost three and a half basis points to 1.945%, but not above bullion prices.
- US President Donald Trump said on Thursday that he had completed interviews to become the next head of the Federal Reserve (Fed) and confirmed that he had made his choice, adding that an official announcement would likely be made before the end of January. Media reports suggest Kevin Hassett, Rick Rieder, Christopher Waller and Kevin Warsh are on the shortlist.
Technical Outlook: Gold price will exceed $5,000 in the tiny term
Gold’s parabolic uptrend continued for the fifth day in a row, with the yellow metal poised to break the $5,000 mark. Price action remains constructive and bulls continued to gain momentum as shown by the Relative Strength Index (RSI) which, despite being overbought, broke through the latest high, indicating that the uptrend remains powerful.
If XAU/USD clears $5,000, the next key resistance levels will be $5,050 and $5,100. Conversely, if XAU/USD falls below $4,950, the next support will be $4,900.
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 utilize 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 powerful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
