- Gold has performed a fresh all-time high at $2,942 and for now has surged over 11% for 2025.
- Traders are bracing for comments from Fed Chairman Powell in his upcoming testimony before Congress.
- The $3,000 is gaining quickly while tail risks are emerging quickly.
Gold’s price (XAU/USD) has set a new record high at $2,942 in early Tuesday trading before flipping into a loss for the day. Meanwhile, United States (US) President Donald Trump has imposed 25% tariffs on steel and aluminum imports for all countries as of March 12,, while China has quietly imposed retaliatory tariffs on some US goods. China is only showing its teeth by now and has not gone full blazing, while US President Trump is nowhere near his promised 60% levies on all Chinese products as announced earlier in his campaign, Bloomberg reports.
Meanwhile, traders will focus on Federal Reserve (Fed) Chair Jerome Powell’s semiannual testimony to lawmakers on Tuesday and Wednesday for fresh clues about the path the US monetary policy will take. Powell is likely to highlight the resilient economy as a key reason central bankers are in no rush to cut borrowing costs further. This is a big risk for Gold this Tuesday, as it could be a bearish element for bullion.
Daily digest market movers: Tail risk emerging
- At 15:00 GMT, Fed Chairman Jerome Powell testifies before the US Senate Banking Committee
- US President Donald Trump said on Monday that the latest round of levies, which go into effect in March, would bolster domestic production and bring more jobs to the US. He also warned the tariffs “may go higher”, Bloomberg reports.
- The CME FedWatch tool shows a 93.5% chance that interest rates will remain unchanged in March, compared to a slim 6.5% chance of a 25 basis point (bps) interest rate cut.
Technical Analysis: As far as it could go for now
A whopping 11% of gains so far this year is making bullion already the favorite trade for the first quarter. Tail risks are set to kick in though, with Fed Chairman Powell to speak later this Tuesday at Capitol Hill. If his speech is hawkish, yields are expected to surge, which could spark some sizable profit-taking in the Gold rally.
The Pivot Point level on Tuesday is the first nearby support at $2,891, followed by the S1 support at $2,871. From there, S2 support should come in at $2,835. In case of a correction, the bigger $2,790 level (October 31, 2024, high) should be able to catch any falling knives.
On the upside, the R1 resistance comes in at $2,928, which was already tested earlier this Tuesday. In case the rally recovers again in the European and US sessions, the $2,950 level, which is the confluence of a big figure and the R2 resistance, will be tested for a break to the upside. Further up, the $3,000 psychological level could be next.
XAU/USD: Daily Chart
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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