Gold advances on increased safe-haven demand

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Gold price (XAU/USD) recovers its recent losses from the previous session on Friday. The yellow metal advances as the broader precious metals market rebounds on safe-haven demand.

Gold rises but heads for a weekly loss as traders trim bets on Fed rate cuts.
Dollar-denominated Gold faces pressure as the US Dollar gains on potential Fed rate hikes.
Iran war entered its seventh day as Tehran launched missiles and drones across the Gulf, while Israel struck Tehran.

Gold price (XAU/USD) recovers its recent losses from the previous session on Friday. The yellow metal advances as the broader precious metals market rebounds on safe-haven demand. However, the yellow metal is on track for its first weekly decline in five weeks as escalating Middle East tensions push oil prices higher, fueling inflation concerns and reducing bets on Federal Reserve rate cuts.

The dollar-denominated Gold faces challenges as the US Dollar (USD) strengthens, as Federal Reserve (Fed) officials continue to consider the possibility of further rate hikes if inflation remains above target. It is worth noting that a weaker US Dollar makes the precious metal cheaper for buyers with foreign currencies, boosting demand.

The US-Israeli conflict with Iran entered its seventh day, with Iran launching missiles and drones across the Gulf on Thursday, striking an oil refinery in Bahrain, while Israel continued airstrikes on Tehran, and the US suspended operations at its embassy in Kuwait.

US President Donald Trump said that Iranian officials reached out to him in an attempt to reach an agreement to end the war, but he insisted it was too late and that the US is pushing to destroy Iran.

Iranian Foreign Minister Abbas Araghchi said Tehran has not sought a ceasefire and has no intention of negotiating, while Iran’s Islamic Revolutionary Guard Corps warned that retaliatory strikes would intensify in the coming days.

Traders await US labor data, including US Nonfarm Payrolls (NFP), where consensus expectations are around 59K for February, following January’s above-trend reading of 130K. Additionally, Retail Sales are expected to fall 0.3% month-over-month in January, after a flat reading in the previous month.

The US is also set to introduce a temporary 15% global tariff this week, replacing the 10% rate enacted after the Supreme Court of the United States struck down most of the earlier levies imposed by Donald Trump. Scott Bessent said the tariff could revert to previous levels within five months as new trade investigations move forward.

Gold holds gains above $5,100 amid bullish bias

Gold price (XAU/USD) is trading around $5,110 at the time of writing. The technical analysis of the daily chart suggests an ongoing bullish bias as the metal price remains within the ascending channel pattern.

The near-term bias is mildly bullish as price holds above the rising 50-day Exponential Moving Average (EMA) and continues to respect the cluster of recent highs rather than extending the prior correction. The nine-day EMA flattens just above the spot, indicating moderating but still bearish short-term momentum. Additionally, the 14-day Relative Strength Index (RSI) at 53 stays above its midline, showing underlying buying pressure remains intact.

The XAU/USD pair is testing the immediate barrier at the nine-day EMA of $5,134. A break above the short-term average and support the pair to approach the upper boundary of the ascending channel at $5,480, followed by the all-time high of $5,598, reached on January 29. On the downside, the initial support lies at the lower boundary of the channel at $5,080. A break below the channel would expose the 50-day EMA at $4,883.

(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.