Gold extends rally to record high as safe-haven demand builds
- Gold price rises to an all-time high in Tuesday’s early European session.
- The prospect of more Fed rate cuts and geopolitical concerns boost the safe-haven flows, benefiting the Gold price.
- The preliminary reading of the US Q3 GDP growth report will be closely watched on Tuesday.
Gold price (XAU/USD) climbs to a record high during the early European trading hours on Tuesday. The precious metal has risen 10% over the past month and nearly 70% in 2025 as heightened geopolitical tensions and economic uncertainty have boosted demand for safe-haven assets such as Gold.
Additionally, expectations that the US Federal Reserve (Fed) will cut interest rates further next year could also support the yellow metal. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. The market is pricing in multiple Fed interest rate cuts in 2026 amid signs of easing inflation and sluggish jobs growth.
Traders await the preliminary reading of the US Gross Domestic Product (GDP) for the third quarter (Q3) later on Tuesday. The US economy is projected to have grown at an annual rate of 3.2% in Q3. It would be a slowdown from the 3.8% growth in Q2. In case of a stronger-than-expected GDP report outcome, this could lift the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term. Also, the US Durable Goods Orders, Industrial Production and ADP employment weekly data will be published on the same day.
Daily Digest Market Movers: Gold jumps on escalating geopolitical tensions, bets on further US rate cuts
- US President Donald Trump said on Monday the United States (US) would maybe keep and maybe sell the oil it had seized off the coast of Venezuela in recent weeks, Reuters reported on Monday. Trump added that the US would also keep the seized ships.
- Russia has intensified its strikes on the southern Ukrainian region of Odesa, causing widespread power cuts and threatening the region's maritime infrastructure, per the BBC.
- Fed Governor Stephen Miran said on Monday he is likely to remain on the central bank's Board of Governors beyond the expiration of his term until whoever President Donald Trump nominates as the next Fed chair is confirmed by the Senate.
- Trump is set to nominate a new central bank chief before Fed Chair Jerome Powell's term ends in May.
- Financial markets are pricing in only a 20.0% chance the Fed will cut interest rates at its next meeting in January, after it reduced them by a quarter-point at each of its last three meetings, according to the CME FedWatch tool.
Gold maintains the overall uptrend, overbought RSI suggests some caution is warranted
Gold edges higher on the day. According to the daily chart, the constructive outlook of the yellow metal prevails, with the price holding above the key 100-day Exponential Moving Average (EMA). The Bollinger Bands widen, suggesting a stronger bullish trend.
Despite the strong trend, the 14-day Relative Strength Index (RSI) is located above 70, indicating an overbought condition. This suggests that any upside extension could be tempered by a period of digestion before the next leg higher.
The recent bull breakout could open the door for a move toward the $4,400 psychological mark. Any follow-through buying above this level could pave the way to $4,450.
On the downside, the initial support level for Gold emerges near the December 22 low of $4,338. Further north, the next contention level to watch is $4,300, the round figure, and the December 17 low.
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
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
