Gold (XAU/USD) reached a new record high of $4,639.77 during Asian hours on Wednesday. Precious metals, including gold, are attracting buyers amid growing bets on interest rate cuts by the Federal Reserve in the wake of lower US inflation.
December US inflation data indicated a decline in core inflation in the US, reinforcing views that price pressures are gradually easing. Interest rate futures showed investors were split between expectations of two or three rate cuts from the Fed this year, well above policymakers’ average expectation of one cut.
Gold prices found support as safe-haven demand strengthened amid renewed concerns about the Federal Reserve’s independence after US prosecutors opened a criminal investigation linked to Chairman Powell’s testimony in June. Geopolitical risks also remained high, with markets closely monitoring the possibility of US involvement in political unrest in Iran following repeated warnings of possible military action.
Daily summary Market drivers: Gold remains stronger as the US dollar stabilizes
- The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, fell after recording modest gains in the previous session. The DXY is trading around 99.10 at the time of writing, supporting dollar-denominated gold by boosting demand from forex buyers.
- The US core CPI, excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held steady at 2.6%, equivalent to a four-year low. The data provided a clearer signal of a decline in inflation after previous releases were skewed by the effects of the lockdown. Meanwhile, the CPI rose 0.3% month-on-month in December 2025, in line with market expectations and repeating the rise seen in September. The annual inflation rate remains at an increase of 2.7%, as expected.
- The US-based human rights organization Harrana reported on Wednesday that the death toll in Iranian protests had reached 2,571. US President Donald Trump urged Iranians to continue protesting, vowing that help was on the way, according to Reuters.
- President Trump said Monday he would impose 25% tariffs on goods coming from any country that does business with Iran, increasing pressure on Tehran amid widespread internal protests. He added that the measure would take effect immediately, without providing further details. Trump warned on Sunday that action may be necessary before any meeting, though he said the Iranian leadership had reached out seeking “negotiation” after his military threats.
- US federal prosecutors threatened to indict Federal Reserve Chairman Jerome Powell over his comments before Congress regarding a building renovation project, raising questions about the central bank’s independence. The Trump administration is pressuring the Fed to lower interest rates, with Powell calling the threat a “pretext” to influence policy.
- US nonfarm payrolls rose by 50,000 in December, lower than the 56,000 in November (revised from 64,000) and weaker than market expectations of 60,000. However, the unemployment rate fell to 4.4% in December from 4.6% in November, while average hourly earnings rose to 3.8% year-on-year in December from 3.6% in the previous reading.
- Richmond Fed President Tom Barkin said the lower unemployment rate was welcome and described job growth as modest but stable. Barkin added that it’s difficult to find companies outside of healthcare or artificial intelligence that are hiring, and said it’s still unclear whether the job market will tilt toward more hiring or more layoffs.
The gold technical setup warns of a possible bearish reversal with the emergence of a rising wedge
Gold (XAU/USD) is trading at around $4,620 on Wednesday. Technical analysis of the daily chart indicates that the XAU/USD pair remains within an emerging rising wedge pattern, indicating weak upward momentum and warning of a potential bearish reversal if the price breaks below the lower trend line on strong trading volume.
The nine-day exponential moving average (EMA) is above the fifty-day EMA, confirming a well-defined bullish bias. Gold price holds above the faster moving average, and the 50-day slope continues to advance, confirming upward pressure in the medium term. The 14-day RSI is at 71.39 in overbought territory, indicating extended momentum even as the trend remains intact.
Immediate resistance appears at record highs near the upper border of the rising wedge around $4,650. A break above this confluence resistance zone would lead the XAU/USD pair to target the $4,650 level. On the downside, initial support lies at the nine-day moving average at $4,520.01, followed by the lower rising wedge boundary around $4,470.00.
Frequently asked questions about gold
Gold has played a major role in human history as it has been widely used as a store of value and a medium of exchange. Currently, apart from its luster and use in jewellery, the precious metal is widely viewed as a safe haven asset, meaning it is a good investment during turbulent times. Gold is also widely viewed as a hedge against inflation and currency depreciation because it is not dependent on any specific issuer or government.
Central banks are the largest holders of gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase gold to improve the perceived strength of the economy and the currency. High gold reserves can be a source of confidence for a country’s solvency. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase since records began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve assets and safe havens. When the value of the dollar declines, 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 rise in the stock market tends to weaken the price of gold, while a sell-off in riskier markets tends to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession could cause the price of gold to rise rapidly due to its safe-haven status. As a lower-yielding asset, gold tends to rise as interest rates fall, while a higher cost of money usually negatively impacts the yellow metal. However, most of the moves depend on how the US Dollar (USD) behaves as the asset is priced in Dollars (XAU/USD). A stronger dollar tends to keep the price of gold in check, while a weaker dollar is likely to push gold prices higher.
(The technical analysis for this story was written with the help of an artificial intelligence tool.)
