Gold scales record highs as trade war fears boost safe-haven demand amid USD weakness
- Gold continues to scale new all-time peaks for the third consecutive day on Wednesday.
- Trade war fears, geopolitical risks, and a spike in volatility benefit the safe-haven XAU/USD.
- The ‘Sell America’ trade weighs on the USD, lending additional support to the commodity.
Gold (XAU/USD) prolongs its weekly uptrend for the third straight day and continues scaling new all-time highs through the Asian session on Wednesday. US President Donald Trump’s threat to slap fresh tariffs on eight European countries that opposed his plan to acquire Greenland triggers a sharp uptick in volatility. Apart from this, persistent geopolitical uncertainties temper investors' appetite for riskier assets and continue to boost demand for the traditional safe-haven commodity.
The momentum lifts the precious metal to the $4,850 level in the last hour and is further sponsored by the prevailing bearish tone surrounding the US Dollar (USD). Trump's tariff threats revived the so-called 'Sell America' trade and dragged the USD to a nearly two-week low on Tuesday. However, reduced bets for more aggressive policy easing by the US Federal Reserve (Fed) help limit further USD losses and might cap the non-yielding Gold amid short-term overbought conditions.
Daily Digest Market Movers: Gold retains bullish bias amid the global flight to safety
- Renewed trade frictions on the back of escalating tensions linked to Greenland rattle global markets and force investors to take refuge in traditional safe-haven assets, lifting the Gold price to a fresh record high on Wednesday.
- US President Donald Trump said on Tuesday that there is no going back on his ambitious plan to acquire Greenland, citing security concerns in the Arctic, and argued that Denmark is unable to adequately protect Greenland.
- Trump added that Greenland is imperative and threatened to impose tariffs on European allies. French President Emmanuel Macron stressed that respect and cooperation, not coercion, should define relations between allies.
- As relations between the US and Europe remained strained over Greenland’s strategic importance, a sharp spike in bond yields rattled global markets and turned out to be another factor that benefits the precious metal.
- Investors dumped the US Dollar amid the uncertainty, potential retaliation, and an acceleration of the de-dollarization trend. This provides an additional boost to the commodity and also contributes to the strong move higher.
- Meanwhile, traders trimmed their bets for two more rate cuts by the US Federal Reserve in 2026 after Trump said last week that he would prefer to keep National Economic Council director Kevin Hassett in his current role.
- This, however, does little to provide any respite to the USD bulls amid the dominant 'Sell America' trade. Traders now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index on Thursday.
- The crucial inflation data will be accompanied by the final US Q3 GDP growth report, which could offer more cues about the Fed's future policy path. The outlook, in turn, will drive the USD and the non-yielding yellow metal.
Gold could appreciate further as ascending trend-channel breakout comes into play
The latest leg up confirms a fresh bullish breakout through the top end of the month-to-date ascending channel. A subsequent strength beyond the $4,800 mark validates the constructive outlook and backs the case for an extension of the well-established uptrend. The Moving Average Convergence Divergence (MACD) line extends above the Signal line, with both above zero, reflecting strengthening bullish momentum; the positive histogram widens, reinforcing the upbeat tone.
The RSI at 81 (overbought) warns of stretched conditions that could cap near-term follow-through and invite consolidation. Should momentum cool while MACD holds in positive territory, buyers would be expected to show interest near the channel support, which, in turn, should contain corrective pullbacks. Conversely, a sustained positive MACD profile and an RSI remaining above 70 would keep buyers in control and extend the appreciating move.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
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.
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.
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.
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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