Gold surges past $4,600 as US Dollar softens and tensions with Iran escalate

Gold Surges as US Dollar Weakens Despite Firm Inflation Data

On Wednesday, gold (XAU/USD) reversed course and posted notable gains, fueled by a broad decline in the US Dollar. This rally occurred even as recent inflation figures reinforced expectations that the Federal Reserve will keep interest rates steady in January. At present, XAU/USD is trading at $4,615, marking a 0.65% increase.

Safe-Haven Demand Rises Amid Dollar Drop and Heightened Iran Tensions

Investor appetite for risk continues to wane, prompting a shift toward gold as a safe-haven asset. October’s Producer Price Index (PPI) in the US indicated that inflation remains above the Fed’s 2% target. Nevertheless, market participants are still betting on rate cuts by the central bank in 2026.

Additional reports showed that US Retail Sales surpassed forecasts, signaling that American consumers boosted their spending, particularly on vehicles and other goods.

Recent headlines highlighted escalating tensions in Iran, with two European officials telling Reuters that US military action could occur within the next day.

Meanwhile, several Federal Reserve policymakers made public statements, keeping the market attentive to their outlooks.

Looking ahead to Thursday, the economic calendar features Initial Jobless Claims for the week ending January 10. Projections suggest 215,000 Americans filed for unemployment benefits, up from 208,000 the previous week. Additionally, manufacturing indices from regional Fed banks are set to be released.

Market Movers: Gold Climbs as Treasury Yields Slide

• The weakening US Dollar is providing support for gold prices. The US Dollar Index (DXY), which measures the greenback against six major currencies, has slipped 0.04% to 99.15. Meanwhile, US Treasury yields are falling, with the 10-year note yield dropping 3.5 basis points to 4.14%.
• The US Bureau of Labor Statistics released data for October and November, but investors focused on the latest numbers. November’s PPI rose 0.2% month-over-month, matching expectations and up from October’s 0.1%. Year-over-year, PPI climbed 3%, beating the 2.7% forecast and October’s 2.8% reading.
• Core PPI fell from 0.3% to 0% month-over-month, below the anticipated 0.2% decrease. Over the past year, core PPI increased by 3%, surpassing the 2.7% estimate but lower than the previous 3.9% figure.
• US Retail Sales for November advanced 0.6% month-over-month, rebounding from October’s 0.1% decline and exceeding the 0.4% forecast. The Control Group, which the Census Bureau uses to calculate GDP, grew 0.4% as expected, though this was down from a revised 0.6% previously.
• Numerous Fed officials spoke publicly. Atlanta Fed President Raphael Bostic noted that inflation remains well above target and that monetary policy should stay restrictive. Minneapolis Fed’s Neel Kashkari emphasized the need to balance both sides of the Fed’s mandate, observing steady economic growth, a stabilizing job market, and easing inflation.
• Fed Governor Miran reiterated the call for 150 basis points of rate cuts this year. Philadelphia Fed’s Anna Paulson echoed dovish sentiments, suggesting inflation could reach the 2% goal by year-end and describing current policy as “somewhat restrictive.”
• Chicago Fed President Austan Goolsbee stressed the importance of central bank independence in maintaining low inflation.
• According to money markets, 50 basis points of rate cuts have been factored in by year-end.

Source: Prime Market Terminal

Technical Outlook: Gold Breaks Above $4,600, Eyes on $4,700

The upward momentum in gold prices remains strong, with the metal reaching a fresh all-time high of $4,643. Should buyers manage to push past the $4,650 resistance, attention will likely shift toward the $4,700 mark. However, the Relative Strength Index (RSI) is hovering near overbought levels and appears flat, suggesting that bullish momentum may be slowing.

On the downside, if XAU/USD dips below $4,600, a retracement toward $4,550 could be on the cards, with the next significant support level at $4,500.

Gold daily chart