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18 Mar 2025
Gold price hits record high above $3,030 as geopolitical tensions and Fed bets fuel rally
- Gold price surges past $3,000, reaching a record high amid Trump’s reciprocal tariffs and geopolitical uncertainty.
- Middle East tensions escalate, with renewed Israel-Hamas hostilities adding to bullion’s 15% year-to-date gain.
- Traders bet on June Fed rate cuts, as falling US Treasury yields and a weaker US Dollar support gold’s uptrend.
Gold price skyrockets past the $3,000 figure and hit a record high of $3,038 on Tuesday amid uncertainty on United States (US) President Donald Trump’s reciprocal tariffs to be enacted on April 2, while traders eye Federal Reserve’s (Fed) monetary policy decision. XAU/USD is trading at $3,037, up by 1.20%.
Risk appetite remains deteriorated, even though talks between Trump and Russian President Vladimir Putin relieved some of traders’ stress with the latter agreeing to a 30-day halt on attacking Ukraine energy facilities, according to Reuters. Nevertheless, the Bullion rally continued with the precious metal gaining over 15% in the year so far.
Hostilities in the Middle East between Israel and Hamas sparked a leg-up in XAU/USD, as Israel strikes killed more than 400 people in Gaza, threatening a two-month ceasefire, revealed Reuters.
Data-wise, the US economic schedule revealed that Industrial Production improved in February. Contrarily, housing data was mixed, with Building Permits falling off the cliff, while Housing Starts rose sharply, revealed the US Census Bureau.
According to the CME Group's FedWatch Tool, traders expect the Fed to keep interest rates unchanged on Wednesday. However, they see nearly a 66% chance of a rate cut in June.
In the meantime, Bullion continued to climb, sponsored by falling US Treasury yields and a weaker US Dollar. The US 10-year T-note yield drops one basis point to 4.183%. At the same time, the US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, falls 0.17% to 103.23.
Daily digest market movers: Gold price poised to extend rally as real yields tumble
- US real yields, as measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) yield, which correlates inversely to Gold prices, dropped one and a half bps to 1.985% via Reuters.
- US Industrial Production expanded 0.7% MoM in February, exceeding the 0.2% forecast and accelerating from January’s 0.3% gain, fueled by robust motor vehicle production.
- Housing data was mixed in February. Building Permits dropped 1.2%, declining from 1.473 million to 1.456 million. Housing Starts jumped 11.2%, rising from 1.35 million to 1.501 million, indicating strength in construction activity.
- Money market has priced in 61 basis points of easing by the Fed in 2025, which has sent US Treasury yields plunging alongside the American Currency.
XAU/USD technical outlook: Gold price conquers $3,000 and is set to end above that level
Gold price is upward biased, poised to challenge higher prices above the current YTD high of $3,038. If buyers clear the latter, they could test $3,050 and $3,100 figures. It’s worth noting that the Relative Strength Index (RSI) is overbought. But the strength of the trend hints that the “most extreme” reading would be 80; hence XAU/USD could continue to trend higher.
Conversely, if Bullion drops below $3,000, the first support would be the February 20 daily high at $2,954, followed by the $2,900 mark.
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.