Gold builds on its steady intraday ascent amid geopolitical risks and Fed rate cut bets
- Gold rallies on Monday as rising geopolitical tensions boost demand for safe-haven assets.
- Bets for more interest rate cuts by the US Fed further benefit the non-yielding yellow metal.
- A broadly firmer USD does little to hinder the XAU/USD pair’s strong intraday positive move
Gold (XAU/USD) continues to scale higher through the first half of the European session on Monday and climbs to a four-day high, around the $4,430-4,431 region in the last hour amid a supportive fundamental backdrop. Geopolitical tensions escalated after the US launched land strikes on Venezuela over the weekend. Moreover, US President Donald Trump's confrontational rhetoric toward Colombia and Mexico raised concerns about regional instability in Latin America, boosting demand for the traditional safe-haven commodity.
Meanwhile, the US Dollar (USD) trims a part of its strong intraday gains to a nearly four-week top amid prospects for more interest rate cuts by the US Federal Reserve (Fed) later this year. This turns out to be another factor driving flows towards the non-yielding Gold and backs the case for a further near-term appreciating move. Traders now look forward to this week's key US macroeconomic releases for more cues about the Fed's rate-cut path, which will drive the USD demand and provide some meaningful impetus to the bullion.
Daily Digest Market Movers: Gold continues to be underpinned by safe-haven flows, dovish Fed expectations
- The US Army's Delta Force – an elite special forces unit – attacked Venezuela and captured its President Nicolás Maduro, along with his wife, on Saturday. Furthermore, US President Donald Trump openly signaled that Colombia and Mexico could also face US action as part of a widening campaign against criminal networks and regional instability.
- This comes on top of the lack of progress in the Russia-Ukraine peace deal, unrest in Iran, and issues surrounding Gaza, which keeps geopolitical risks in play and benefits the safe-haven Gold at the start of a new week. Apart from this, dovish US Federal Reserve expectations turn out to be another factor underpinning the non-yielding yellow metal.
- Investors are pricing in the possibility that the US central bank will lower borrowing costs in March and could deliver another interest rate cut later this year. Moreover, expectations that the Trump-aligned new Fed chair will push for aggressive action overshadow the central bank's hawkish guidance of just one rate reduction by the end of this year.
- This week's release of important US macro data, including the closely-watched US Nonfarm Payrolls report on Friday, and the upcoming inflation data, will determine Fed policy trajectory. This, in turn, will play a key role in influencing the near-term US Dollar price dynamics and determining the next leg of a directional move for the commodity.
- The USD builds on its recent goodish recovery move from the lowest level since early October, touched on December 24, and rallied to a nearly four-week top. This, however, fails to hinder the XAU/USD pair's intraday move up beyond the $4,400 mark, suggesting that the path of least resistance for the bullion remains to the upside.
Gold bulls retain control amid an intraday breakout through the 100-hour SMA and $4,400
On the 1-hour chart, the 100-period Simple Moving Average (SMA) slopes downward, keeping the broader tone cautious. The XAU/USD pair stands above this average, hinting at an intraday rebound, while the 100-SMA at $4,377.80 offers initial support. The Moving Average Convergence Divergence (MACD) histogram has flipped to positive and is widening, indicating the MACD line above the signal line and improving bullish momentum. The Relative Strength Index (RSI) sits at 63.42, firm but not overbought.
Holding above the descending 100-SMA would keep the recovery path open, while a close back below it would expose further retracement. The MACD’s positive tone suggests buyers retain the initiative and a continued expansion would favor additional gains. The RSI remains north of 60, reinforcing upward pressure; a retreat toward 50 would flag fading momentum.
(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.
