Gold consolidates below all-time high as markets await US CPI
- Gold steadies below record highs as investors adopt a wait-and-see stance ahead of US inflation data.
- Safe-haven demand remains firm, underpinned by geopolitical tensions and uncertainty around Federal Reserve independence.
- Technically, the broader trend remains bullish, but near-term price action suggests a period of consolidation or pullback risk.
Gold (XAU/USD) treads water on Tuesday as the market shifts into wait-and-see mode ahead of the release of US inflation data at 13:30 GMT. At the time of writing, XAU/USD trades around $4,585, consolidating just below Monday’s record peak near $4,630.
The precious metal remains underpinned by steady safe-haven demand as geopolitical and economic uncertainty keep investors cautious. Markets remain unsettled by the criminal investigation into Federal Reserve (Fed) Chair Jerome Powell, which has revived concerns over the central bank's independence.
At the same time, risk sentiment has been hit by fresh geopolitical developments after US President Donald Trump threatened a 25% tariff on countries doing business with Iran amid nationwide anti-government protests.
This follows earlier US actions in Venezuela, where Washington carried out a military operation against President Nicolás Maduro, as well as Trump’s renewed rhetoric over strategic interests in Greenland.
Looking ahead, attention is squarely on the US inflation report. Economists expect the Consumer Price Index (CPI) to come in at 0.3% MoM and 2.7% YoY, both unchanged from the previous month. The data could help shape near-term expectations for the Fed and drive the next move in Gold.
Market movers: Markets jittery as DOJ probes Powell, Fed independence in focus
- The US Department of Justice issued grand jury subpoenas as part of a criminal investigation into Federal Reserve Chair Jerome Powell, linked to his Senate testimony on the Fed’s $2.5 billion headquarters renovation project. Powell said the move is politically motivated and stressed that the Fed will continue to set policy based on economic conditions rather than political pressure.
- Adding to concerns over Fed independence, US President Donald Trump is expected to announce a potential replacement for Jerome Powell later this month, with Powell’s term as Fed Chair ending in May 2026. Markets widely expect Trump to nominate a candidate more closely aligned with his policy views, reinforcing uncertainty around the future direction of US monetary policy.
- On the monetary policy front, markets are currently pricing in around two Fed rate cuts this year. However, last week’s US employment report showed the labour market is holding up better than many feared, tempering expectations for aggressive easing and reinforcing the view that the Fed can afford to keep interest rates unchanged at its January meeting.
- Attention also remains on the US Supreme Court, which is due to hold an opinion day on Wednesday on the legality of Trump-era tariffs. At the same time, the court is set to hear arguments on January 21 in the case over Trump’s attempt to remove Fed Governor Lisa Cook.
- Major investment banks remain broadly bullish on Gold’s outlook. Bank of America, JPMorgan, Goldman Sachs, Morgan Stanley and UBS expect prices to hold in the $4,500-$5,000/oz range through 2026, citing anticipated Fed rate cuts, rising debt concerns, steady central bank and ETF buying, and persistent geopolitical uncertainty, according to Reuters.
Technical analysis: Gold pauses below $4,600
XAU/USD bulls are taking a breather after the recent rally, as overbought signals on both the daily and 4-hour charts triggered mild technical selling.
On the 4-hour chart, RSI has eased after topping above 70, with bearish divergence signalling fading upside momentum in the short term, even as the broader trend remains constructive.
On the downside, initial support is seen in the $4,525-$4,500 zone, where the 21-period Simple Moving Average (SMA) aligns. A decisive break below this area could open the door for a deeper corrective move toward the $4,400 level.
On the upside, a sustained move above $4,600, followed by a break of the all-time high near $4,630, could pave the way for gains toward $4,700-$4,750.
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.