Gold (XAU/USD) extended its uptrend for the third consecutive day on Wednesday, marking yet another all-time high amid heightened geopolitical tensions, trade uncertainty, and a renewed flight to safety. 

Investors flocked to the precious metal, favoring the non-yielding asset over riskier alternatives as the US Dollar (USD) came under pressure. This article from PrimeLuno presents a clear and thorough explanation of the subject.

Gold Surges Amid Trade Tensions and Volatility

The XAU/USD pair has been unstoppable this week, scaling new peaks in the wake of escalating trade war fears and the persistent geopolitical risks surrounding Greenland. The US President’s latest threat to impose tariffs on eight European countries over opposition to Greenland acquisition plans triggered a sharp uptick in market volatility, driving investors toward safe-haven commodities.

Gold extended gains above the $4,850 level, a move largely supported by the prevailing bearish tone in the USD. The US President’s comments reignited the so-called ‘Sell America’ trade, dragging the greenback to near two-week lows. 

Meanwhile, a moderate scaling back of expectations for aggressive US Federal Reserve (Fed) policy easing has helped contain further USD weakness, limiting immediate upside for non-yielding Gold amid short-term overbought conditions.

Tariff Concerns Keep Gold Bulls in Control

Renewed trade friction surrounding Greenland’s strategic importance rattled global markets, forcing investors to seek safe-haven assets. The precious metal’s surge to a fresh record high underscores the market’s sensitivity to geopolitical uncertainty.

The US President emphasized that Greenland is a security imperative, asserting that Denmark cannot adequately protect the territory. His threat to impose tariffs on European allies added fuel to the fire. 

French President Emmanuel Macron responded by advocating respect and cooperation instead of coercion, highlighting tensions in US-Europe relations.

The fallout was immediate. Rising bond yields and the possibility of retaliatory measures destabilized global markets, encouraging XAU/USD accumulation. Investors also dumped the US Dollar, accelerating the ongoing de-dollarization trend, and providing additional support for the commodity.

At the same time, market participants reduced bets on further rate cuts by the Fed, even after the US President suggested retaining National Economic Council director Kevin Hassett. Nonetheless, the dominant ‘Sell America’ trade maintained downward pressure on the USD. Traders now await critical US economic data, including the Personal Consumption Expenditure (PCE) Price Index and the final Q3 GDP growth report, which are expected to influence both Fed policy expectations and Gold price action.

Technical Indicators Signal Overbought Conditions

From a technical perspective, Gold’s latest leg higher has broken through the top end of the month-to-date ascending channel, confirming a bullish breakout. The metal’s ability to sustain levels beyond $4,800 reinforces the constructive outlook and suggests potential for further upside.

The Moving Average Convergence Divergence (MACD) line remains firmly above the Signal line, with both indicators positioned above zero, reflecting strengthening bullish momentum. The MACD histogram continues to widen, emphasizing the upbeat technical bias.

Meanwhile, the Relative Strength Index (RSI) has climbed to 81, signaling overbought conditions. While this suggests that a near-term consolidation could occur, it does not necessarily imply a reversal. 

Should momentum cool while MACD remains in positive territory, buyers may target channel support levels, effectively containing any corrective pullbacks. Conversely, if MACD retains its positive slope and RSI remains above 70, bulls are likely to stay in control, driving the precious metal to higher highs.

Flight to Safety and USD Weakness Underpin Gains

Gold’s surge is being further buttressed by a weakened USD, which remains under pressure from the US’s trade rhetoric. The combination of geopolitical uncertainty, trade war fears, and market volatility has triggered a classic flight-to-safety trade, with investors favoring Gold as a hedge against currency risk and market instability.

Analysts note that the ongoing ‘Sell America’ dynamic not only weighs on the greenback but also reinforces the appeal of non-yielding assets like Gold. Even as short-term traders remain cautious due to overbought indicators, the broader bullish trend appears intact, supported by a blend of fundamental drivers and technical momentum.

Outlook: Consolidation Before the Next Leg Higher

Looking ahead, Gold may require a period of consolidation before attempting another leg higher. Market participants should monitor key technical levels, including support near the ascending channel and resistance around the $4,850-$4,900 range. 

A sustained positive MACD profile combined with RSI levels above 70 would indicate that buyers remain dominant, while a pullback toward channel support could offer an entry point for risk-managed long positions.

In summary, Gold bulls continue to dictate the narrative in the precious metals market, leveraging geopolitical tension, trade uncertainties, and USD weakness to push XAU/USD to new record highs. While overbought conditions suggest potential near-term consolidation, the overall bullish framework remains robust, with investors poised to capitalize on the enduring flight-to-safety trade.