Gold (XAU/USD) prolongs its record-setting rally for the eighth consecutive day and surges past the $5,200 mark during the Asian session on Wednesday. Economic and geopolitical uncertainties on the back of US President Donald Trump’s decision turn out to be a key factor that continues to drive flows towards the safe-haven commodity. Apart from this, renewed worries about the US Federal Reserve’s (Fed) independence and prospects for lower interest rates in the US provide an additional boost to the non-yielding yellow metal.
Furthermore, sustained buying by central banks, along with increasing investment demand and allocations to non-dollar assets, contributes to the strong positive momentum. Meanwhile, the supporting factors offset the upbeat market mood and a goodish US Dollar (USD) recovery from a four-year low, which tends to undermine the Gold. Traders now look forward to the outcome of a two-day FOMC meeting for more cues about the future policy path, which will influence the USD price dynamics and provide a fresh impetus to the XAU/USD pair.
Daily Digest Market Movers: Gold bulls retain control as global uncertainties continue to drive safe-haven flows
- The recent short-lived escalation of friction between the United States and NATO, over US President Donald Trump’s ambitious aim to acquire Greenland, raised doubts about trust within the NATO alliance. This, along with the protracted Russia-Ukraine war and trade-related uncertainties, continues to fuel the safe-haven Gold’s blistering rally witnessed since the beginning of last week.
- Trump accused Canada of potentially becoming a gateway for Chinese goods into the US and threatened to impose a 100% tariff on goods imported from Canada over its potential trade deal with China. Prime Minister Mark Carney said that Canada has no intention of pursuing a free trade deal with China, the development reignited trade-war fears and benefited the precious metal.
- On the geopolitical front, Russia has drawn a hard red line in peace negotiations with Ukraine during the US-brokered peace talks in Abu Dhabi last week. The trilateral talks ended without a deal on Saturday as Ukraine outright rejected Russia’s demand to cede all of the Donbas region to end the nearly four-year war. This turns out to be another factor lending support to the commodity.
- Meanwhile, Trump said on Tuesday that he will soon announce his pick to serve as the next head of the Federal Reserve, and predicted interest rates would decline after the new chair takes over. This comes on top of growing market expectations that the US central bank would lower borrowing costs two more times in 2026 and dragged the US Dollar to its lowest level since February 2022.
- The USD, however, stages a goodish recovery during the Asian session on Wednesday as bears opt to lighten their bets amid some repositioning ahead of the highly anticipated FOMC decision. The spotlight would be on the post-meeting press conference, where comments from Fed Chair Jerome Powell might infuse volatility in the markets and provide a fresh impetus to the XAU/USD pair.
Gold might consolidate near ascending channel resistance amid overbought conditions
The ascending channel from $4,696.64 supports the uptrend, with resistance near $5,274.38. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, reflecting strengthening bullish momentum. The histogram has begun to contract, suggesting momentum may be cooling into resistance. RSI at 77 (overbought) warns that upside could be capped near the channel top.
Should the XAU/USD pair pause, initial support sits at the channel floor near $5,096.12, keeping the series of higher lows intact. A clear break above the upper boundary would extend the advance, while a rejection there could trigger consolidation back toward the lower band. The MACD remains firmly positive even as the histogram narrows, while the RSI’s overbought reading favors a period of digestion before fresh trend extension. Overall, the channel bias stays bullish, with dips expected to be shallow while the structure holds.
(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.
Source: https://www.fxstreet.com/news/gold-extends-rally-further-beyond-5-200-fresh-all-time-highs-and-counting-ahead-of-fed-202601280445
