Gold bulls retain control; fresh all-time high and counting amid flight to safety
|- Gold continues to scale new all-time peaks for the third consecutive day on Wednesday.
- Trade war fears, geopolitical risks, and a spike in volatility benefit the safe-haven XAU/USD.
- The ‘Sell America’ trade weighs on the USD, lending additional support to the commodity.
Gold (XAU/USD) prolongs its weekly uptrend for the third straight day and continues scaling new all-time highs heading into the European session on Wednesday. US President Donald Trump’s threat to slap fresh tariffs on eight European countries that opposed his plan to acquire Greenland triggers a sharp uptick in volatility. Apart from this, persistent geopolitical uncertainties temper investors' appetite for riskier assets and continue to boost demand for the traditional safe-haven commodity.
The momentum lifts the precious metal to the $4,850 level in the last hour and is further sponsored by the prevailing bearish tone surrounding the US Dollar (USD). Trump's tariff threats revived the so-called 'Sell America' trade and dragged the USD to a nearly two-week low on Tuesday. However, reduced bets for more aggressive policy easing by the US Federal Reserve (Fed) help limit further USD losses and might cap the non-yielding Gold amid short-term overbought conditions.
Daily Digest Market Movers: Gold relentless buying remains unabated amid tariff woes
- Renewed trade frictions on the back of escalating tensions linked to Greenland rattle global markets and force investors to take refuge in traditional safe-haven assets, lifting the Gold price to a fresh record high on Wednesday.
- US President Donald Trump said on Tuesday that there is no going back on his ambitious plan to acquire Greenland, citing security concerns in the Arctic, and argued that Denmark is unable to adequately protect Greenland.
- Trump added that Greenland is imperative and threatened to impose tariffs on European allies. French President Emmanuel Macron stressed that respect and cooperation, not coercion, should define relations between allies.
- As relations between the US and Europe remained strained over Greenland’s strategic importance, a sharp spike in bond yields rattled global markets and turned out to be another factor that benefits the precious metal.
- Investors dumped the US Dollar amid the uncertainty, potential retaliation, and an acceleration of the de-dollarization trend. This provides an additional boost to the commodity and also contributes to the strong move higher.
- Meanwhile, traders trimmed their bets for two more rate cuts by the US Federal Reserve in 2026 after Trump said last week that he would prefer to keep National Economic Council director Kevin Hassett in his current role.
- This, however, does little to provide any respite to the USD bulls amid the dominant 'Sell America' trade. Traders now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index on Thursday.
- The crucial inflation data will be accompanied by the final US Q3 GDP growth report, which could offer more cues about the Fed's future policy path. The outlook, in turn, will drive the USD and the non-yielding yellow metal.
Gold needs to consolidate before the next leg up amid overbought conditions
The latest leg up confirms a fresh bullish breakout through the top end of the month-to-date ascending channel. A subsequent strength beyond the $4,800 mark validates the constructive outlook and backs the case for an extension of the well-established uptrend. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, reflecting strengthening bullish momentum; the positive histogram widens, reinforcing the upbeat tone.
The RSI at 81 (overbought) warns of stretched conditions that could cap near-term follow-through and invite consolidation. Should momentum cool while MACD holds in positive territory, buyers would be expected to show interest near the channel support, which, in turn, should contain corrective pullbacks. Conversely, a sustained positive MACD profile and an RSI remaining above 70 would keep buyers in control and extend the appreciating move.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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