Gold buying remains unabated as trade war fears continue to boost safe-haven demand
- Gold continues scaling new all-time highs on Tuesday amid sustained safe-haven demand.
- Persistent geopolitical uncertainties and trade war fears act as a tailwind for the commodity.
- A broadly weaker USD also lends support to XAU/USD and contributes to the move higher.
Gold (XAU/USD) builds on its intraday breakout momentum above the $4,700 mark and continues scaling new all-time highs through the early European session on Tuesday. The protracted Russia-Ukraine war keeps geopolitical risks in play and offsets subsiding civil unrest in Iran, which has reduced the likelihood of a US intervention. Adding to this, concerns about a possible trade war between the US and Europe, amid rising tensions over Greenland, continue to weigh on investors' sentiment and offer support to the safe-haven precious metal.
Meanwhile, US President Donald Trump's tariff threats have revived the 'Sell America' trade and exert some follow-through pressure on the US Dollar (USD), despite diminishing odds for more aggressive policy easing by the Federal Reserve (Fed).
This further benefits the Gold and contributes to the positive momentum. The XAU/USD bulls, however, might opt to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index on Thursday for more cues about the Fed's policy path and before placing fresh bets.
Daily Digest Market Movers: Gold bulls retain control on safe-haven buying, weaker USD
- US President Donald Trump seems to have stepped back from his earlier threats of military action against Iran on the back of Tehran’s brutal crackdown on protests. Geopolitical risks, however, remain in play amid the protracted Russia-Ukraine war, which, along with trade war fears, continue to underpin the safe-haven Gold.
- Russia launched a barrage of drone strikes on Ukraine's energy infrastructure overnight on Monday, triggering widespread power outages across the country amid freezing temperatures and high demand. Russian forces also launched a combined drone and missile attack on the Ukrainian capital of Kyiv early on Tuesday.
- Trump threatened over the weekend that he would impose additional 10% levies from February 1 on goods imported from eight European nations that stand in his way to acquire Greenland. France proposed responding with a range of previously untested economic countermeasures, raising the risk of a US-EU trade war.
- Traders trimmed their bets for more aggressive policy easing by the US Federal Reserve in 2026 after Trump said that he would prefer to keep National Economic Council director Kevin Hassett in his current role. This suggests that someone else will succeed the outgoing Fed Chair Jerome Powell, though it fails to benefit the USD.
- Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed's preferred inflation gauge – on Thursday. This will be accompanied by the final US Q3 GDP report and offer more cues about the Fed's rate-cut path, which, in turn, should influence the non-yielding commodity.
Gold uptrend remains uninterrupted; ascending channel breakout comes into play
An ascending channel from $3,845.01 frames the advance. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, reinforcing a bullish bias. The widening positive histogram suggests buyers retain control. RSI at 70.95 is overbought, and momentum looks stretched. Resistance aligns with the channel’s upper boundary near $4,709.61.
Failure to clear that cap could trigger consolidation or a pullback within the channel. Channel support stands near $4,401.47. A contraction in the MACD histogram would hint at fading momentum, while a moderation in RSI from overbought would ease upside pressure. A sustained break above the upper boundary could extend the uptrend, whereas dips would be expected to hold on approaches to the lower band.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
