Gold News: Gold Price Surges on Geopolitical Tensions, Fed Rate Cut Expectations

Gold Edges Higher Amid Geopolitical Tensions

Spot Gold (XAUUSD) is edging higher on Friday with investors focusing on geopolitical events rather than the start of a major commodity index rebalancing and today’s mixed U.S. economic data. Meanwhile, the market is now on track for a weekly gain despite two days of heavy selling pressure.

At 16:38 GMT, XAUUSD is trading $4506.74, up $29.18 or +0.65%.

Escalating Global Tensions Drive Safe-Haven Demand

Geopolitical tensions jumped again this week as unrest grew in Iran, the war in Ukraine dragged on, and the U.S. moved to detain Venezuela’s Nicolás Maduro. Washington even revived talk about taking control of Greenland. In an interview with Fox News, President Trump also said he’s considering military strikes on drug cartels in Mexico.

Those comments come on top of recent threats of action in Cuba and Colombia, which have raised concerns on both sides of the aisle in Congress. On Thursday, the Senate took its first step toward blocking any further military moves in Venezuela, with five Republicans joining Democrats to back a War Powers Resolution.

For traders, this mix of uncertainty tends to push investors toward safer assets. If tensions escalate further, gold could easily see more demand as traders look for a hedge against geopolitical risk.

Treasury Yields and Dollar Impact Gold Sentiment

A muted response by Treasury traders could also be underpinning demand for gold, while a stronger dollar may be weighing on demand. U.S. Treasury yields were little changed mid-morning on Friday after the latest jobs report showed a mixed picture of the U.S. labor market.

Mixed Jobs Data Keeps Fed Rate Cut Hopes Alive

The December nonfarm payrolls report showed a stable, yet softening, labor market that may still lead the Federal Reserve to cut interest rates, perhaps as early as March. Traders don’t expect the Fed to cut rates at its January meeting.

The U.S. economy added 50,000 new jobs last month, weaker than expected, but the unemployment rate dipped to 4.4%. Economists polled by Dow Jones had expected 73,000 new jobs last month, and the unemployment rate to have dropped to 4.5%, CNBC reported.

Traders continue to price in at least two rate cuts this year with the Fed projecting only one. This has the market anticipating a weaker dollar because of the move, and consequently higher gold prices.

Technical Analysis: Gold Targets All-Time High

Technically, the main trend is up. A trade through $4536.74 will signal a resumption of the uptrend. The main trend will change to down if the swing bottom at $4274.02 fails.

Short-term support is the retracement zone at $4436.38 to $4405.38. This area held as support on Thursday when the market traded down to $4407.83.

Market Outlook

Looking ahead, spot gold is now trading at its high for the week as the bearish reaction to the massive rebalancing has so far failed to materialize. Meanwhile, geopolitics and favorable economic data continue to drive solid buying. This gives investors a clean shot at the $4536.74 all-time high.

Unless there is a dramatic reversal and a break under $4405.38, we expect the uptrend to continue into the close and possibly a new high next week.

More Information in our Economic Calendar.