Gold remains supported by sustained safe-haven buying, dovish Fed expectations
- Gold gains positive traction for the seventh straight day amid sustained safe-haven buying.
- Fed rate cut bets keep the USD near a multi-month low and also support the precious metal.
- Bulls seem reluctant and look to the FOMC policy decision for some meaningful impetus.
Gold (XAU/USD) attracts fresh buyers following the overnight modest pullback from the record high, though it remains below the $5,100 mark through the Asian session on Tuesday. Mounting global tensions, along with strong central bank buying and retail demand, continue to offer support to the precious metal. Adding to this, persistent geopolitical uncertainties turn out to be another factor that underpins the safe-haven precious metal, which seems unaffected by a generally positive risk tone.
However, a modest US Dollar (USD) uptick could act as a headwind for the Gold as bulls might opt to move to the sidelines ahead of the crucial Federal Reserve (Fed) policy decision on Wednesday. Investors will look for more cues about the Fed's rate cut path, which will influence the USD and provide a fresh directional impetus to the non-yielding yellow metal. Nevertheless, the supportive fundamental backdrop suggests that the path of least resistance for the bullion remains to the upside.
Daily Digest Market Movers: Gold sticks to bullish bias amid sustained safe-haven buying, Fed rate cut bets
- US President Donald Trump said on Saturday that he would impose a 100% tariff on Canada if it follows through on a trade deal with China. This follows Trump's Greenland tariff threat, though it was withdrawn later, and adds a layer of uncertainty.
- Moreover, heightened geopolitical risks stemming from the protracted Russia-Ukraine war continue to drive safe-haven flows. This, along with a bearish US Dollar and dovish Federal Reserve bets, pushes the Gold price higher for the seventh straight day.
- Policy shocks from the Trump administration have tarnished the US Dollar's reputation in global financial markets. Moreover, bets that the central bank would lower borrowing costs two more times this year dragged the USD to a four-month low on Monday.
- On the economic data front, the US Census Bureau reported on Monday that Durable Goods Orders rose 5.3% in November vs. expectations for a 0.5% growth. New orders excluding transportation increased 0.5%, while excluding defense it rose 6.6%.
- Meanwhile, Russia insisted that Ukraine must cede all of the Donbas region as part of any deal to end the war. Ukraine rejected the proposal outright as the US-brokered Russia-Ukraine peace talks in Abu Dhabi ended without a deal on Saturday.
- The USD bears, however, pause for a breather as the market focus remains glued to the outcome of a two-day FOMC meeting, due to be announced on Wednesday. Investors will look for more cues about the Fed's rate cut path, which will drive the USD.
- Hence, Fed Chair Jerome Powell's remarks during the post-meeting press conference might infuse volatility in the markets and influence the commodity amid sustained buying by central banks and record inflows into exchange-traded funds.
- In fact, the People's Bank of China (PBOC) extended its gold-buying spree for a fourteenth month in December, while the National Bank of Poland, Reserve Bank of India, and Central Bank of Brazil were active buyers in late 2025 and early 2026.
- Moreover, global demand for investments in gold through exchange-traded funds increased by 25% in 2025. Gold holdings rose to 4,025.4 tonnes from 3224.2 tonnes in 2024, and the total Assets Under Management in ETFs stood at $558.9 billion.
Gold might continue to face hurdle near the top end of a short-term ascending channel
The overnight failure to break out through a short-term ascending channel and the subsequent pullback could be seen as the first sign of a possible bullish exhaustion. However, the emergence of fresh buying on Tuesday warrants some caution before confirming that the Gold price has topped out. Moreover, the ascending channel underpins the broader uptrend, with the lower boundary offering support near $4,971.48 as the XAU/USD pair holds mid-range. The Moving Average Convergence Divergence (MACD) histogram has flipped negative and is widening, indicating the MACD line has slipped below the Signal line around the zero level, and momentum is rolling over.
The Relative Strength Index (RSI) at 70.84 is overbought and easing, which could keep buyers cautious while the XAU/USD pair consolidates within the channel. On the topside, the channel’s upper boundary at $5,156.89 caps advances. A recovery in MACD toward a bullish crossover would be needed to reassert upside traction, while the elevated RSI argues for digestion before a sustained break. A 4-hour close above the cap would open the path to extend the uptrend, whereas failure to improve momentum would leave the bias vulnerable to further tests of the channel floor.
(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.
