Gold buying remains unabated near record high amid geopolitical risk, Fed concerns

Daily Digest Market Movers: Gold retains bullish bias amid sustained safe-haven demand, Fed concerns

Following a strike in Venezuela earlier this month, US President Donald Trump said that Washington would temporarily take charge of Venezuela’s administration to oversee a transition. Furthermore, Trump referred to himself as the acting President of Venezuela in a post on Truth Social.
The WSJ, citing unnamed US officials, reported that Trump is considering reprimanding Iran in response to its crackdown on mass anti-government demonstrators, which has killed more than 500 people. This, along with the intensifying Russia-Ukraine war, keeps geopolitical risks in play.
In fact, a Ukrainian drone strike triggered a fire at an oil depot in Russia’s southern Volgograd region on Saturday. Russia, on the other hand, used its hypersonic Oreshnik intermediate-range ballistic missile in an overnight strike on the Lviv region, close to the EU and NATO borders.
Separately, China escalated its dispute with Japan, restricting exports of rare earths and rare-earth magnets to Japan. The ban follows the recent Taiwan-related remarks by Japan’s Prime Minister. This pushes the safe-haven Gold to a fresh all-time peak during the Asian session on Monday.
Meanwhile, US Federal Reserve Chair Jerome Powell said that the threat of criminal indictment against him is a consequence of the central bank setting interest rates based on the best assessment of what will serve the public, rather than following the preferences of the President.
Powell added that the outcome of the investigation will determine the future of the central bank’s decisions. Traders pared their bets for more interest rate cuts this year after the US jobs report showed on Friday that the Unemployment rate fell to 4.4% in December from 4.6%.
Meanwhile, the headline NFP showed that the economy added 50K last month compared to market expectations for a reading of 60K and November's 56K (revised from 64K). The data does little to impress the USD bulls amid rising worries about the US central bank's independence.
Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Monday, leaving the USD and the precious metal at the mercy of comments from influential FOMC members. The focus, however, remains on the US inflation figures this week.

Gold bulls might aim to challenge ascending channel resistance, around the $4,625 region

From a technical perspective, the recent move higher witnessed over the past month or so has been along an upward sloping channel. This points to a well-established short-term uptrend and favors the XAU/USD bulls. Moreover, Gold holds above the upward sloping 200-period Simple Moving Average (SMA), which underscores a positive trend and should offer dynamic support near the $4,325-4,320 region. The Moving Average Convergence Divergence (MACD) line extends above the Signal line and remains in positive territory, while a widening histogram suggests strengthening bullish momentum.

The Relative Strength Index (RSI) stands at 71.82 (overbought), which could temper immediate gains and invite consolidation near the upper boundary. A pullback would find support at the channel floor around the $4,365 area, with the rising 200 SMA underpinning the broader bullish bias. Sustained traction above these supports would keep the path higher intact, while a clear break above channel resistance would open a fresh leg toward higher territory.

(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.