Gold Holds Near Record Highs Around $4,650 on Rising Safe-Haven Demand
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Gold (XAU/USD) continues to trade near record highs, with investors flocking to the precious metal amid easing US inflation and rising geopolitical risks. The yellow metal reached a fresh record high of $4,639.77 during Asian trading hours on Wednesday, demonstrating its enduring appeal as a safe-haven asset. LFtrade professionals provide valuable insights through a detailed breakdown of the topic.
Softer US Inflation Fuels Gold Buying
Gold’s recent strength is underpinned by soft US inflation data, which has strengthened expectations of potential Federal Reserve (Fed) rate cuts. The US Core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose by just 0.2% in December, below market forecasts. Annual core inflation remained at 2.6%, matching a four-year low, signaling that underlying price pressures are easing.
Meanwhile, the headline CPI increased 0.3% month-over-month in December, consistent with market expectations, and annual inflation stayed at 2.7%, confirming a moderation in inflationary trends. These readings have fueled speculation among investors that the Fed could implement two to three rate cuts in 2026, above the median projection of one from policymakers.
Gold, as a non-interest-bearing asset, becomes particularly attractive in a lower-rate environment, as its opportunity cost diminishes compared to yield-bearing assets like bonds.
Geopolitical Tensions Support Safe-Haven Demand
In addition to softer inflation, geopolitical risks have bolstered safe-haven demand for Gold. Markets remain cautious over US involvement in Iran amid domestic unrest and protests. According to the HRANA rights group, the death toll from ongoing protests in Iran has reached 2,571, while the US President has threatened 25% tariffs on goods from countries trading with Iran, escalating geopolitical tensions.
Renewed concerns over the Fed’s independence have also emerged after US federal prosecutors threatened to indict Fed Chair Jerome Powell over congressional testimony. Such developments add to market uncertainty, traditionally a tailwind for gold as investors seek safe-haven assets in times of elevated political or economic risk.
Gold Remains Strong as US Dollar Stabilizes
The US Dollar Index (DXY), a measure of the US Dollar against six major currencies, has edged lower to around 99.10, after posting modest gains previously. This relative USD softness supports dollar-denominated Gold, attracting foreign-currency buyers and reinforcing upward pressure on XAU/USD.
In the US labor market, Nonfarm Payrolls (NFP) rose 50,000 in December, below November’s revised 56,000 and under the expected 60,000, signaling sluggish employment growth. However, the Unemployment Rate declined to 4.4%, while Average Hourly Earnings climbed to 3.8% YoY, highlighting stable but moderate wage growth.
Richmond Fed President Tom Barkin noted the modest job growth, emphasizing that hiring remains concentrated in healthcare and AI sectors, leaving overall labor market trends uncertain. Combined with easing inflation, these factors continue to support bullish sentiment in gold markets.
Investment Flows and ETF Activity Support Gold
Exchange-traded funds (ETFs) backed by Gold have seen notable inflows in recent weeks, reflecting growing investor appetite for bullion. According to the latest fund reports, global Gold ETFs added approximately 15 tons in the first week of January, signaling increased participation from both retail and institutional investors.
This inflow strengthens price support near record highs, particularly as ETFs often act as liquidity providers, amplifying safe-haven buying during periods of market uncertainty.
Technical Outlook: Ascending Wedge Pattern Signals Caution
On the technical front, XAU/USD is trading around $4,620 and remains within an emerging ascending wedge pattern on the daily chart. This pattern suggests weakening upside momentum and a potential bearish reversal if the price breaks below the lower wedge boundary on strong volume.
The nine-day Exponential Moving Average (EMA) is positioned above the 50-day EMA, confirming a well-defined bullish bias. Gold continues to trade above the faster EMA, and the 50-day EMA slope remains upward, indicating medium-term upside pressure.
The 14-day Relative Strength Index (RSI) sits at 71.39, entering overbought territory and signaling stretched momentum. Immediate resistance is found near record highs around $4,650, which coincides with the upper wedge boundary. A break above this zone could propel Gold further to test $4,650, while downside support lies at the nine-day EMA ($4,520) and the lower wedge boundary around $4,470.
Conclusion
Gold’s rally to near all-time highs reflects a combination of macroeconomic factors, geopolitical risks, and technical dynamics. Softer US inflation, expectations of Fed rate cuts, and uncertainties in Iran and domestic US policy continue to drive safe-haven demand.
Technically, while the bullish trend remains intact, traders should monitor the ascending wedge for signs of reversal, particularly if Gold breaches support levels. For now, XAU/USD remains a preferred hedge against economic and political uncertainty, with potential upside to $4,650 and key support at $4,520–$4,470.