- XAU/USD nears record highs, Goldman Sachs sees $3,100 target.
- The investment bank projects a 9% upside as central bank demand surges.
- Trump’s tariff policies fuel market jitters, boosting Gold’s appeal.
- Fed officials remain cautious on inflation, FOMC Minutes in focus this week.
Gold price surged more than 1% on Tuesday due to safe-haven demand amid uncertainty over controversial trade policies proposed by US President Donald Trump. The XAU/USD trades at $2,933 after bouncing off daily lows of $2,892.
The financial markets remain rattled following last week’s US Trump imposition of tariffs on steel and aluminum imports and plans for applying reciprocal duties. Therefore, Bullion prices remain poised to challenge record highs after hitting $2,942 on February 11.
Goldman Sachs upward revised XAU/USD price to $3,100 by year’s end as the investment bank said “structurally higher” central bank demand will add 9% to the price of the non-yielding metal.
After Trump’s victory on November 6, Gold dipped to $2,534 before rallying over 15.90% due to haven and global central bank buying. The World Gold Council (WGC) revealed that central banks purchased more than 54% YoY to 333 tonnes following Trump’s victory, according to its data.
Gold traders should be warned that Federal Reserve (Fed) officials turned slightly skeptical about getting the job done on inflation after the Consumer Price Index (CPI) had risen for five straight months. San Francisco Fed President Mary Daly said, “Policy needs to remain restrictive until…I see that we are really continuing to make progress on inflation.”
Market participants will watch the release of January’s Federal Open Market Committee (FOMC) monetary policy decision, along with housing data, Initial Jobless Claims for the last week, and S&P Global Flash PMIs.
Daily digest market movers: Gold price benefits from safe-haven demand
- The US 10-year Treasury bond yield climbs seven basis points (bps), yields 4.55%.
- US real yields, which correlate inversely to Bullion prices, rise four-and-a-half basis points to 2.086%, a headwind for Bullion prices.
- Fed Governor Christopher Waller stated that his “baseline” expectation is that President Donald Trump’s new trade restrictions will have only a limited impact on prices.
- Meanwhile, Philadelphia Fed President Patrick Harker reaffirmed support for maintaining a steady interest rate policy, acknowledging that inflation has remained elevated and persistent in recent months.
- US Housing Starts for January is expected to decrease from 1.499 million to 1.4 million. At the same time, Building Permits for the same period are expected to drop from 1.482 million to 1.46 million.
- Money market fed funds rate futures are pricing in 39 basis points of easing by the Fed in 2025.
XAU/USD technical outlook: Gold price skyrockets past $2,900
Gold price trend remains up with buyers setting their sights on clearing the all-time high of $2,942. Further key resistance levels lie at $2,950 and the $3,000 mark. It should be said that if those levels are cleared, Goldman Sachs estimated XAU/USD to hit $3,100 by year’s end.
For a bearish continuation, sellers must push the Gold spot price below $2,900. In that outcome, key support levels will be exposed, like the February 14 swing low of $2,877, followed by the February 12 low of $2,864. On further weakness, Gold could fall to test the October 31 swing high at $2,790.
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.
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