Gold (XAU/USD) is on a strong upward trend, crossing the $5,300 mark. This rise is fueled by ongoing demand for safe havens amid economic and geopolitical uncertainties. Worries about the US Federal Reserve’s independence and possible interest rate cuts are also boosting gold’s appeal. Although the US Dollar is trying to recover from a significant drop, it hasn’t affected the positive outlook for gold, which remains strong despite favorable conditions in the equity markets. Increased geopolitical tensions, such as disputes between the US and NATO over Greenland and trade issues between Canada and China, are enhancing gold’s performance. Additionally, the lack of progress in peace talks between Russia and Ukraine makes gold more attractive. As US President Donald Trump prepares to appoint a new Federal Reserve chair, the expectation of interest rate cuts continues to pressure the US Dollar, positively impacting gold.

Technical Analysis of XAU/USD

Technical analysis shows that XAU/USD is in an upward channel, indicating ongoing bullish momentum. There is resistance at around $5,274.38, with initial support at approximately $5,096.12 near the bottom of the channel. However, rising prices suggest that some consolidation might occur before further increases. The Federal Reserve’s interest rate decision is a key event that will impact currency movements based on rate changes and related announcements. The surge in gold past $5,300, driven by geopolitical concerns and a dovish outlook from the Fed, suggests we should maintain a bullish stance. However, with the Relative Strength Index at 77 indicating overbought conditions, taking long futures positions may be risky before today’s FOMC decision. We recommend buying call options as a safer way to benefit from potential gains while clearly defining our maximum loss. The ongoing conflicts, including the Russia-Ukraine situation and new trade tensions, are creating a climate ripe for sharp price fluctuations. This means volatility will likely stay high, making strategies like long straddles appealing to take advantage of significant movements following the Fed’s announcement. This market trend aligns with what we have seen since 2023 when central banks worldwide began accumulating gold at an unprecedented rate, establishing a solid price floor.

Strategies for Gold Investment

We are watching for clear signals from the Fed hinting at lower rates, building on the dovish shift that began in 2024 and 2025. The market is already anticipating two more rate cuts this year, and with the US national debt exceeding $40 trillion last year, the case for non-yielding gold remains very strong. Selling out-of-the-money put options could be a good way to generate income, betting on the idea that any declines will be short-term. Given the uncertainty in alliances and the pressure on the US dollar, we are also increasing our use of gold derivatives as a hedge within broader portfolios. The dollar’s struggle to bounce back from its low points in early 2025, the weakest since February 2022, highlights gold’s role as a key safe-haven asset. Any suggestions of a more dovish Fed today will likely accelerate this defensive shift. Create your live VT Markets account and start trading now.

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