Gold buying remains unabated as safe-haven flows continue to fuel record-breaking rally
- Gold scales new all-time peaks for the ninth day in a row amid sustained safe-haven buying.
- Concerns about the Fed’s independence weigh on the USD and benefit the precious metal.
- The XAU/USD bulls seem rather unaffected by overbought conditions on short-term charts.
Gold (XAU/USD) prolongs its record-setting rally for the ninth straight day and advances over 3% on Thursday, climbing to the $5,600 neighborhood during the Asian session. Investors continue to seek refuge in traditional safe-haven assets on the back of heightened geopolitical and economic uncertainties, which have been fueling the commodity's parabolic rise of more than 10% since the beginning of this week. Apart from this, the recent US Dollar (USD) slump to its lowest level since February 2022 turns out to be another factor behind the precious metal's blistering rally witnessed over the past two weeks or so.
Meanwhile, the non-yielding Gold seems rather unaffected by US Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks on Wednesday that followed the highly anticipated decision to leave interest rates unchanged. Even the underlying bullish tone – as depicted by a generally positive sentiment around the equity markets – does little to hinder the bullion's strong positive momentum. This, in turn, suggests that the path of least resistance for the XAU/USD pair remains to the upside, though extremely overbought conditions warrant caution for bulls before positioning for any further appreciation.
Daily Digest Market Movers: Gold bulls retain control as safe-haven demand persists
- Concerns that US tariff increases from last year continue to weigh on the global economic outlook resurfaced after Germany – the Eurozone's biggest economy – on Wednesday lowered its growth forecasts for this and next year.
- US President Donald Trump warned Iran to come to the table and make a deal on nuclear weapons, or future US attacks would be far worse. Iran responded with a threat to strike against the US, Israel, and those who support them.
- In other geopolitical developments, Russia continues with its aerial attacks on Ukrainian cities and infrastructure. The latest attack involved a Russian drone strike on a passenger train in northeastern Ukraine that killed five people.
- This, along with the emergence of fresh US Dollar selling, assists the safe-haven Gold to prolong the record-setting rally for the ninth straight day and climb to the $5,600 neighborhood during the Asian session on Thursday.
- The US Federal Reserve, as was anticipated, decided to leave rates unchanged at the end of a two-day meeting on Wednesday. Two Fed Governors – Stephen Miran and Christopher Waller – dissented in favor of a 25 basis-points cut.
- In the post-meeting press conference, Fed Chair Jerome Powell said that inflation was still well above the 2% target. The muted market reaction, however, suggests that investors remain concerned about threats to the Fed's independence.
- A criminal investigation of Powell by the Department of Justice and an evolving effort to fire Fed Governor Lisa Cook put the focus on the freedom of monetary authorities from direct political interference in formulating policies.
- Meanwhile, traders seem convinced that the Fed will maintain the status quo through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May, though they are still pricing in two more rate cuts in 2026.
- The outlook, in turn, fails to assist the US Dollar to build on the previous day's modest recovery from a nearly four-year low and turns out to be another factor that provides an additional boost to the non-yielding yellow metal.
- Traders now look to Thursday's release of the usual Weekly Initial Jobless Claims data from the US for a short-term impetus. The supportive fundamental backdrop, however, remains tilted firmly in favor of the XAU/USD bulls.
Gold shrugs off overbought conditions; ascending channel breakout remains in play
The overnight breakout through a short-term ascending channel hurdle near $5,303.94 keeps the bullish tone intact. Moreover, the Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, and the histogram is widening, suggesting strengthening upside momentum.
However, the Relative Strength Index (RSI) sits at 88 (overbought), which could cap immediate advances and prompt a pause. Should momentum cool, initial support aligns with the channel’s lower boundary at $5,135.11, where buyers could re-emerge. A contraction in the MACD histogram would hint at a fading impulse, while the RSI easing from overbought would normalize conditions; even so, holding above former channel resistance would preserve the broader bullish bias and keep pullbacks orderly within the rising structure.
(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.
