Gold prices have rebounded, erasing intraday losses to turn positive during Monday’s North American session. The precious metal is trading close to its all-time high at $2,817.30, buoyed by a combination of factors that have increased its appeal as a safe-haven asset. Notably, the imposition of tariffs by US President Donald Trump on North American allies and China has played a significant role in driving demand for Gold.
The 14-day Relative Strength Index (RSI) currently fluctuates between 60.00 and 80.00, signaling strong bullish momentum for Gold. In addition, the upward-sloping 20-day Exponential Moving Average (EMA) near $2,735.70 confirms a bullish near-term trend. These technical indicators suggest that Gold could potentially rise to near $2,900, with the January 27 low of $2,730.50 providing solid support.
The geopolitical landscape has further intensified the allure of Gold as a safe-haven asset. Investors are increasingly turning to Gold amid uncertainties stemming from geopolitical tensions. This trend is reflected in central banks' actions, which added approximately 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to the World Gold Council. Central banks remain among the largest holders of Gold, underlining its importance as a strategic reserve asset.
The market dynamics are also influenced by movements in the US Dollar and interest rates. At press time, the US Dollar Index (DXY) is up by 0.6% from its previous close. Despite this increase in the Dollar’s value, Gold prices remain elevated due to its inverse correlation with the US Dollar and US Treasuries—both major reserve and safe-haven assets. A strong Dollar typically exerts downward pressure on Gold prices; however, when the Dollar depreciates, Gold tends to rise, offering investors and central banks an opportunity to diversify their assets during turbulent times.
Interest rates play a crucial role in shaping Gold's market performance. As a yield-less asset, Gold thrives in environments with lower interest rates, while higher borrowing costs can exert downward pressure on its price. Currently, market participants are closely monitoring Non-Farm Payrolls (NFP) data, which will significantly influence expectations regarding the Federal Reserve’s interest rate policy. The Fed's decision on whether to maintain interest rates within the range of 4.25% to 4.50% will have substantial implications for the trajectory of Gold prices.