Gold (XAU/USD) extends its rally for a second consecutive session, breaking above the $4,700 level and printing a new all-time high during Tuesday’s Asian trading hours. Persistent geopolitical tensions from the prolonged Russia-Ukraine conflict continue to support safe-haven demand, outweighing easing civil unrest in Iran that has lowered the probability of direct US involvement. At the same time, renewed concerns over a potential trade dispute between the United States and Europe—driven by escalating tensions surrounding Greenland—have further dampened risk sentiment and boosted demand for the precious metal.
In addition, US President Donald Trump’s renewed tariff threats have reignited the so-called “Sell America” trade, keeping the US Dollar (USD) under pressure. This comes despite reduced expectations for aggressive monetary easing by the Federal Reserve (Fed), providing further tailwinds for gold prices. That said, bullish momentum may pause as traders await Thursday’s release of the US Personal Consumption Expenditure (PCE) Price Index, a key indicator for assessing the Fed’s future policy direction.
Daily Digest – Market Drivers: Gold supported by safe-haven flows and USD weakness
President Trump appears to have softened his earlier stance on potential military action against Iran following Tehran’s harsh crackdown on protests. Nevertheless, broader geopolitical risks remain elevated due to the ongoing Russia-Ukraine war and rising trade tensions, continuing to underpin demand for gold as a safe-haven asset.
Russia intensified its military campaign overnight, launching multiple drone strikes on Ukraine’s energy infrastructure on Monday, resulting in widespread power outages amid freezing temperatures and elevated energy demand. Russian forces also carried out a combined missile and drone attack on Kyiv early Tuesday.
Over the weekend, Trump warned of additional 10% tariffs starting February 1 on imports from eight European countries opposing US efforts to acquire Greenland. France has signaled possible retaliation through unconventional economic measures, increasing fears of a broader US-EU trade conflict.
Meanwhile, traders scaled back expectations for deeper Federal Reserve rate cuts in 2026 after Trump indicated a preference for keeping National Economic Council Director Kevin Hassett in his current role. This has fueled speculation about leadership changes at the Fed following the departure of Chair Jerome Powell, though it has failed to provide meaningful support to the US Dollar.
Market participants now turn their attention to Thursday’s release of the US PCE Price Index—the Fed’s preferred inflation gauge—alongside the final Q3 GDP data. These releases are expected to offer clearer guidance on the Fed’s rate outlook and could play a key role in shaping near-term price action for the non-yielding metal.
