Gold relentless rally remains uninterrupted on safe-haven rush as Fed rate decision looms
- Gold is prolonging its record-setting rally for the eighth consecutive day on Wednesday.
- Sustained safe-haven buying and Fed rate cut bets continue to underpin the commodity.
- A goodish USD recovery does little to hinder the momentum ahead of the Fed decision.
Gold (XAU/USD) continues scaling new all-time peaks heading into the European session on Wednesday and remains supported by the global flight to safety. Investors continue to take refuge in traditional safe-haven assets amid economic and geopolitical uncertainties on the back of US President Donald Trump's decisions. Furthermore, worries about the US Federal Reserve's (Fed) independence and prospects for lower interest rates in the US contribute to driving flows towards the non-yielding yellow metal.
Meanwhile, the US Dollar (USD) attempts a modest recovery from its lowest level since February 2022, touched on Tuesday, amid some repositioning trade ahead of the key central bank event. This, however, does little to dent the underlying bullish sentiment surrounding the Gold, which also seems unaffected by the upbeat mood across equity markets. Traders now look to the crucial Fed decision for cues about the rate-cut path, which will drive the USD demand and influence the XAU/USD pair.
Daily Digest Market Movers: Gold buying remains unabated amid sustained safe-haven demand
- 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 breaks out through ascending channel as bulls shrug off 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.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
