Breaking: Gold rallies further beyond $4,400; highest since early June
- Gold attracts buyers for the third straight day and climbs to over a two-month high on Tuesday.
- Receding Fed hike bets turn out to be a key factor driving flows towards the non-yielding bullion.
- Traders might opt to wait for further geopolitical developments and the latest US inflation figures.
Gold (XAU/USD) scales higher for the third consecutive day – also marking the fifth day of a positive move in the previous six – and climbs to its highest level since June 5, further beyond the $4,400 mark during the Asian session on Tuesday. A weak US jobs report released last Friday pointed to signs of a cooling labor market, undermining the case for the US Federal Reserve (Fed) to raise interest rates and driving flows towards the non-yielding bullion.
Investors, however, remain worried about inflation risks stemming from volatile crude oil prices due to the Iran war. This keeps Fed rate hike bets firmly on the table, which helps the US Dollar (USD) preserve the previous day's modest recovery gains and could act as a headwind for the Gold price. In the latest developments surrounding the Middle East crisis, US President Donald Trump rejected Iran’s demand for compensation over damages caused during the war; instead, he held Iran responsible for lives lost across the region.
Meanwhile, Iran ruled out any future negotiations with Trump and said that it will wait until the US President’s term ends on January 20, 2029, to resume talks, dampening hopes for a swift reopening of the Strait of Hormuz. Furthermore, shipping traffic through the Bab el-Mandeb Strait remains choked due to the Iran-backed Houthis' naval blockade against Saudi Arabia. This led to the overnight sharp spike in crude oil prices and revived inflation fears. Moreover, traders are still pricing in at least one rate hike by the Fed in 2026.
The outlook, in turn, remains supportive of elevated US Treasury bond yields, which favors USD bulls and warrants caution before positioning for any further near-term appreciating move for gold. Traders might also opt to wait for the release of the US inflation figures – the Consumer Price Index and the Producer Price Index on Wednesday and Thursday, respectively. The crucial data will be looked upon for more cues about the Fed's future policy path, which, in turn, will influence the USD and the XAU/USD pair.
XAU/USD daily chart
Technical Analysis
An intraday breakout through the 100-day Simple Moving Average (SMA) and the 50.0% Fibonacci retracement of the April-June fall suggest that buyers retain control. This, in turn, supports prospects for additional gains to the 200-day SMA at $4,498, en route to the 61.8% retracement at $4,515 and then the higher 78.6% level near $4,669. On the downside, immediate support is offered by the 50.0% retracement at $4,406, reinforced by the 100-day SMA at $4,389, with deeper structural floors aligning at the 38.2% retracement near $4,297 and the 23.6% level at $4,162 ahead of the cycle low around $3,945.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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FXStreet Team
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