Gold Price Forecast: Fresh record highs and counting for XAU/USD as geopolitics, Fed take centerstage
- Gold price sits at all-time highs above $3,000 as Middle East tensions escalate.
- US Dollar finds haven demand as geopolitics outweigh economic uncertainties.
- Gold price eyes more upside as the daily technical setup stays bullish.
Gold price is holding firm in Asian trades on Tuesday, building on its record-setting uptrend. Escalating Middle East geopolitical tensions are the primary driver behind the latest leg up in Gold price.
Gold price capitalizes on geopolitical jitters ahead of Fed
Reuters reported early Tuesday that a ceasefire between Israel and Hamas collapsed after Israeli military hit targets across Gaza, with Palestinian health ministry officials reporting at least 100 dead.
Israeli Prime Minister Benjamin Netanyahu's office accused Hamas of "repeated refusal to release our hostages" and rejecting proposals from US President Donald Trump's Mideast envoy Steve Witkoff.
In response, Hamas turned down the proposal of releasing 59 hostages still held in Gaza.
Further, some unconfirmed reports that an Iranian ship gathering intelligence was sunk by US forces as Gaza attacks took place added to the Middle East tensions. Over the weekend, US launched airstrikes on large-scale strikes on Yemen, targeting the Iran-backed militant group – Houthis. In response, Houthis attacked US vessels in the Red Sea.
Investors scurried to the traditional safe-haven Gold price on intensifying geopolitical risks as economic uncertainties linger on the Trump-induced global trade war.
White House reaffirmed on Tuesday that the reciprocal tariffs will go into effect on April 2. Meanwhile, US Retail Sales data for February rose less than expected, coming in at 0.2% on a monthly basis. The market forecast was for a 0.7% growth.
The data added to the US economic slowdown worries, helping Gold price stay afloat on Monday while the US Dollar (USD) continued to remain at the losing.
However, in Tuesday’s trading, the US Dollar finds fresh buyers on a flight to safety alongside Gold price. It remains to be seen if the Greenback can extend the rebound ahead of Wednesday’s US Federal Reserve (Fed) policy announcements.
That said, markets could resort to repositioning, cashing in on their Gold longs following the ongoing record-setting rally. For now, geopolitics will remain in the spotlight, driving the Gold price action in the sessions ahead.
Gold price technical analysis: Daily chart
Gold price looks to extend the upside break of an ascending triangle formation as confirmed last Thursday.
Having found acceptance above the $3,000 psychological barrier on Monday, Gold buyers now keep their sight on the $3,050 mark.
The 14-day Relative Strength Index (RSI) is grinding higher, prodding the overbought region near 69.50 at the press time. The leading indicator suggests that there is more room for the upside.
If a correction sets in, Gold price could challenge the initial demand area near the $2,980 level.
The next downside caps are at the previous triangle resistance-turned-support at $2,956 and the 21-day Simple Moving Average (SMA) at $2,929.
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.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
