Gold (XAU/USD) stands firm near its all-time high during the first half of the European session, with bulls now waiting for a move beyond the $4,600 mark before taking a position for further upward movement. The US incursion into Venezuela, US President Donald Trump’s threat to take military action in response to the unrest in Iran, the Russian-Ukrainian war, the dispute between China and Japan, and the White House’s insistence on acquiring Greenland, all of this would make investors nervous. This, in turn, negatively impacts global risk sentiment and continues to support the safe haven status of the precious metal.
Meanwhile, concerns about the independence of the US Federal Reserve have pulled the US dollar away from its highest level since December 5, which it reached on Friday, and are contributing to driving flows into non-income-producing gold. However, US jobs data released on Friday tempered expectations for aggressive Fed easing in 2026, which in turn limits the precious metal’s upside. Traders also appear reluctant to place new bullish bets around XAU/USD and may choose to move on the sidelines ahead of the latest US inflation numbers, due this week.
Market Drivers in Daily Summary: Gold maintains bullish bias amid continued safe-haven demand and Fed concerns
- After an air strike in Venezuela earlier this month, US President Donald Trump said that Washington would temporarily take charge of the Venezuelan administration to oversee the transition. Furthermore, Trump referred to himself as the acting president of Venezuela in a post on Truth Social.
- The Wall Street Journal, citing unnamed US officials, reported that Trump was considering rebuking Iran in response to its crackdown on massive anti-government protesters, which resulted in the deaths of more than 500 people. This, coupled with the escalating Russian-Ukrainian war, keeps geopolitical risks present.
- In fact, a Ukrainian drone airstrike caused a fire in an oil depot in the Volgograd region of southern Russia on Saturday. On the other hand, Russia used its Oreshnik hypersonic medium-range ballistic missile in a night strike on the Lviv region, close to the European Union and NATO borders.
- Separately, China escalated its dispute with Japan, restricting exports of rare earth elements and rare earth magnets to Japan. The ban comes in the wake of recent Taiwan-related statements made by the Japanese Prime Minister. This pushes safe-haven gold to a new all-time high during the Asian session on Monday.
- Meanwhile, US Federal Reserve Chairman Jerome Powell said the threat of a criminal indictment against him is the result of the central bank setting interest rates based on its best assessment of what will serve the public, rather than following the president’s preferences.
- Powell added that the outcome of the investigation will determine the future of the central bank’s decisions. Traders trimmed their bets for more interest rate cuts this year after the US jobs report on Friday showed the unemployment rate fell to 4.4% in December from 4.6%.
- Meanwhile, the Non-Farm Payrolls report showed that the economy added 50K last month compared to market expectations for a reading of 60K and 56K for November (revised from 64K). This data did not affect dollar bulls much amid growing concerns about the independence of the US central bank.
- Going forward, there are no relevant market-moving economic data scheduled to be released from the US on Monday, leaving the US dollar and precious metals at the mercy of comments from influential FOMC members. However, the focus remains on US inflation numbers this week.
Gold bulls may aim to challenge bullish channel resistance around the $4,625 area
From a technical perspective, the recent upward movement we have seen over the past month or so has been along an upward sloping channel. This indicates an established short-term uptrend and favors XAU/USD bulls. Moreover, gold is holding above the 200-period simple moving average (SMA), which confirms the positive trend and should provide dynamic support near the $4,325-4,320 area. The moving average convergence-divergence (MACD) line extends above the signal line and remains in positive territory, while an expanding histogram indicates strengthening upward momentum.
The Relative Strength Index (RSI) stands at 71.82 (overbought), which could dampen immediate gains and call for consolidation near the upper border. The pullback will find support at the bottom of the channel around the $4,365 area, with the high of the 200 SMA supporting the broader bullish bias. Sustained traction above these support levels would keep the higher path intact, while a clear break above channel resistance would open a new move towards higher territory.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
Frequently asked questions about risk sentiment
In the world of financial terminology, the two widely used terms “risk appetite” and “risk aversion” refer to the level of risk that investors are willing to take over the indicated period. In a “risk on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk off” market, investors begin to “play safe” because they are concerned about the future, and thus buy assets that are less risky and more guaranteed to generate a return, even if it is relatively modest.
Typically, during periods of “risk on”, stock markets rise, and most commodities – with the exception of gold – will also rise in value because they benefit from positive growth expectations. The currencies of countries exporting heavy goods are strengthening due to increased demand, and cryptocurrencies are rising. In a “risk off” market, bonds – especially major government bonds – rise, gold shines, and safe-haven currencies like the Japanese yen, Swiss franc and US dollar all benefit.
The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and minor foreign currencies such as the Ruble (RUB) and South African Rand (ZAR) tend to appreciate in ‘risk’ markets. This is because the economies of these currencies rely heavily on commodity exports for growth, and commodities tend to rise in price during periods of risk. This is because investors expect increased demand for raw materials in the future due to increased economic activity.
The major currencies that tend to rise during “risk off” periods 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 crises investors buy US government debt, which is considered safe because the world’s largest economy is unlikely to default. The reason for the yen is the increased demand for Japanese government bonds, because a high percentage of them are held by domestic investors who are unlikely to get rid of them – even in a crisis. The Swiss franc, because strict Swiss banking laws provide investors with enhanced capital protection.
