Gold bulls retain control near monthly top amid tariff jitters, dovish Fed bets, weak USD

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Gold prolongs its uptrend for the fourth straight day and draws support from a combination of factors.
Trade-related uncertainties and rising geopolitical tensions underpin demand for the safe-haven bullion.
Fed rate cut bets and a broadly weaker USD provide an additional boost to the non-yielding commodity.

Gold (XAU/USD) pauses for a breather following an intraday move up to a fresh monthly peak, touched earlier this Monday, though the supportive fundamental backdrop backs the case for an extension of a four-day-old uptrend. Renewed trade-war fears, along with rising geopolitical tensions in the Middle East, turn out to be key factors that underpin the safe-haven precious metal and validate the constructive outlook.

US President Donald Trump announced a new framework following a Supreme Court verdict against his sweeping tariffs and imposed a new global levy of 15% – the maximum allowed under the statute – on items imported into America. This, in turn, fueled concerns about retaliatory measures and potential economic fallout from disruptions to global supply chains, weighing on the risk sentiment and strengthening demand for the Gold as a defensive asset.

Meanwhile, data released on Friday showed that the US Personal Consumption Expenditures (PCE) Price Index increased 2.9% over the 12 months through December. Furthermore, the core gauge, which excludes the volatile food and energy components, advanced 3.0% YoY, reaffirming bets that the US Federal Reserve (Fed) would not cut rates in March. However, traders are still pricing in the possibility of two 25-basis-point (bps) rate cuts by the Fed this year.

The expectations were lifted by a weak US GDP print, which showed that the economy grew by a 1.4% annualized pace in the fourth quarter, marking a sharp deceleration from the 4.4% rise in Q3, amid the longest-ever US government shutdown. This, along with trade uncertainties, drags the US Dollar (USD) away from its highest level since January 23, touched last week, and turns out to be another factor providing an additional boost to the non-yielding Gold.

Furthermore, the risk of a military conflict between the US and Iran contributes to the precious metal's move higher. Negotiators from the US and Iran are poised to meet in Geneva on Thursday following the submission of a detailed nuclear proposal by Iran. Reports suggest that US President Donald Trump is considering a potential military strike against Iran in the coming days and could pursue a larger assault later if diplomacy fails to curb Tehran’s nuclear ambitions.

XAU/USD 4-hour chart

Gold seems poised to climb further amid a bullish technical setup

From a technical perspective, the strong follow-through move up at the start of the new week validates last Friday's breakout above the $5,100 mark horizontal resistance and favors the XAU/USD bulls. Moreover, the Moving Average Convergence Divergence (MACD) line extends above the Signal line and stands above zero. The histogram widens on the positive side, signaling strengthening bullish momentum.

Adding to this, the precious metal holds above the rising 200-period Exponential Moving Average (EMA), supporting the advance. The upward slope of this average keeps the short-term bias tilted higher. That said, the Relative Strength Index (RSI) at 73.23 is overbought and could limit immediate follow-through.

Above the rising 200-period EMA at $4,864.04, the bias stays positive, and pullbacks could remain contained while that gauge holds. MACD remains above the Signal line and the zero mark, and momentum would soften if the histogram begins to contract. With RSI at 73.23, overbought conditions warn of a pause, and a cooling phase could unfold before trend continuation. As long as price holds over the 200-period EMA, the broader rebound tone would remain intact even amid consolidation.

(The technical analysis of this story was written with the help of an AI tool.)

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

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.

What are the key assets to track to understand risk sentiment dynamics?

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.

Which currencies strengthen when sentiment is "risk-on"?

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.

Which currencies strengthen when sentiment is "risk-off"?

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.

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