Indeed, XAU/USD kicked off this week on a notably strong bullish gap. As geopolitical tensions escalate and recession fears mount, investors have begun to flee to safe-haven assets. Gold prices spiked when they tested the channel resistance. At the same time, the market reacted to recent events – namely threats from US President Donald Trump for a trade war and increased tensions across the globe.
At time of writing, gold has just set a new all-time high price, with strong resistance observed at the $4,700 level. This increase follows the RSI (Relative Strength Index) which now sits at a value of 70.35, showing that the crypto asset in question is overbought. Analysts caution that the price has traveled too far, too fast. That may be a difficult high-wire act to continue in the face of market corrections and macro-economic headwinds.
The recent announcement from President Trump on further tariffs has spurred gold demand dramatically. Specifically he announced that an additional 10% tariff would go into effect on February 1. This new charge will apply to goods from eight European countries Denmark, France, Germany, Netherlands, Sweden, Finland, United Kingdom, and Norway. This decision has increased the worries of many investors over rising trade wars and their economic impact.
At the same time, geopolitical volatility is putting upward pressure on gold prices. Iran has recently threatened retaliation in the case of any such attack against its Supreme Leader, Ayatollah Ali Khamenei. These threats have ignited fears of a broader conflict in the region. Ukraine’s deputy foreign minister, Andrii Sybiha, confirmed alarming claims. He warns that Russia may be planning attacks on key infrastructure related to nuclear power plants. President Volodymyr Zelensky told Fidesz politician and European parliamentary president Roberta Metsola that the bombing of civilian infrastructure means they’re not interested in negotiations, raising the stakes even further.
Aside from geopolitics, monetary policy considerations are driving market dynamics. The US dollar has found some stabilization from lowered expectations for aggressive policy easing by the US Federal Reserve. This stabilization has helped prevent a deeper slide for the currency, which has thus far held gold prices at bay. Even amid Trump’s tariff threats, fears of inflation have increased. Consequently, investors are rushing to gold, finding it a safe, dependable store of value.
While gold’s recent performance reflects robust demand amid uncertainty, analysts caution about potential resistance levels that may challenge its upward trajectory. The nearest support level for gold is at $4,407.91, along the lower line of the channel. This re-entry level might provide some buffer from the ever-present risk of a price drop should sentiment in the market sour.
The US Q3 GDP growth final report is due out any day now. It could be the most important near-term driver of USD price dynamics, and the biggest potential X factor for gold. As gold prices continue to climb, any significant change in the economic data will have investors recalibrating their bets against the dollar and for gold.