Gold hits fresh record highs above $4,600 due to safe-haven demand
- Gold recorded a record high of $4,639.77 on Wednesday.
- The non-interest-bearing Gold attracts buyers as softer US inflation fuels growing bets on Fed rate cuts.
- The XAU/USD gains ground as geopolitical risks favor safe-haven demand.
Gold (XAU/USD) reaches the fresh record high of $4,639.77 during the Asian hours on Wednesday. Precious metals, including Gold, attract buyers amid growing bets on Federal Reserve (Fed) rate cuts following the softer inflation in the United States (US).
US inflation data for December signaled easing underlying US inflation, strengthening views that price pressures are gradually cooling. Rate futures showed investors divided between expectations of two or three Fed rate cuts this year, well above policymakers’ median projection of one.
Gold prices found support as safe-haven demand strengthened amid renewed concerns over the Fed’s independence after US prosecutors opened a criminal probe linked to Chair Powell’s June testimony. Geopolitical risks also remained elevated, with markets closely watching the possibility of US involvement in Iran’s political unrest following repeated warnings of potential military action.
Daily Digest Market Movers: Gold remains stronger as US Dollar weakens
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is edging lower after registering modest gains in the previous session. The DXY is trading around 99.10 at the time of writing, supporting dollar-denominated Gold by boosting demand from foreign-currency buyers.
- US Core Consumer Price Index (CPI), excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held at 2.6%, matching a four-year low. The data provided a clearer sign of easing inflation after earlier releases were skewed by shutdown effects. Meanwhile, CPI increased by 0.3% month-over-month in December 2025, matching market expectations and repeating the rise seen in September. The annual inflation remains at 2.7% increase as expected.
- President Trump said on Monday that he would impose 25% tariffs on goods from any country doing business with Iran, stepping up pressure on Tehran amid widespread domestic protests. He added that the measure would take effect immediately, without providing further details. Trump warned on Sunday that action may be required before any meeting, even as he said Iran’s leadership had reached out seeking “to negotiate” after his military threats.
- US federal prosecutors threatened to indict Fed Chair Jerome Powell over his comments to Congress regarding a building renovation project, raising questions about the central bank’s independence. The Trump administration has been pressuring the Fed to cut interest rates, with Powell calling the threat a “pretext” to influence policy.
- US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000. However, the Unemployment Rate ticked lower to 4.4% in December from 4.6% in November, while the Average Hourly Earnings climbed to 3.8% YoY in December from 3.6% in the previous reading.
- Richmond Fed President Tom Barkin said the decline in the unemployment rate was welcome and described job growth as modest but stable. Barkin added that it is difficult to find firms outside healthcare or AI that are hiring and said it remains unclear whether the labor market will tilt toward more hiring or more firing.
Gold technical setup warns potential bearish reversal as ascending wedge emerges
Gold (XAU/USD) is trading around $4,620 on Wednesday. The technical analysis of the daily chart suggests the XAU/USD pair remains within an emerging ascending wedge pattern, signaling weakening upside momentum and warning of a potential bearish reversal if the price breaks below the lower trendline with strong volume.
The nine-day Exponential Moving Average (EMA) stands above the 50-day EMA, confirming a well-defined bullish bias. Gold price holds above the faster average, and the 50-day slope continues to advance, underscoring medium-term upside pressure. The 14-day Relative Strength Index (RSI) at 71.39 is overbought, flagging stretched momentum even as the trend stays intact.
The immediate resistance appears at the record highs near the upper boundary of the ascending wedge around $4,650. A break above this confluence resistance zone would lead the XAU/USD pair to target $4,650 level. On the downside, the initial support lies at the nine-day EMA of $4,520.01, followed by the lower ascending wedge boundary around $4,470.00.
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.
(The technical analysis of this story was written with the help of an AI tool.)
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
