Gold Price Forecast: XAU/USD rises to record high above $4,550 on geopolitical risks, rate cut bets

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Gold price jumps to a record high around $4,555 in Monday’s early Asian session.
Geopolitical tensions remained elevated, boosting safe-haven assets such as Gold.
The US economy added 50,000 jobs in December, below the consensus.

Gold price ( XAU/USD) rises to a fresh all-time high near $4,555 during the early Asian session on Monday. The precious metal extends its upside amid safe-haven demand and expectations of a US interest rate cut. Traders will take more cues from the release of the US Consumer Price Index (CPI) inflation data later on Tuesday.

CNN reported on Sunday that US President Donald Trump is weighing a series of potential military options in Iran following deadly protests in the country. The sources said Trump considers following through on his recent threats to strike the Iranian regime should it use lethal force against civilians.

Furthermore, the United Kingdom (UK) and Germany are discussing plans to increase their military presence in Greenland to show Trump that the continent is serious about Arctic security. This action came after the arrest of former President Nicolas Maduro by US forces last week. Uncertainty and geopolitical risks across the globe have boosted a traditional safe-haven asset like Gold.

A mixed US jobs report added to expectations for US Federal Reserve (Fed) rate cuts, which provide some support to the yellow metal. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

The US Nonfarm Payrolls (NFP) rose by 50,000 in December, according to the US Bureau of Labor Statistics (BLS) on Friday. This reading followed November's 56,000 (revised from 64,000) and came in below the market consensus of 60,000. The Unemployment Rate ticked lower to 4.4% in December from 4.6% in November.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.