Gold(XAU/USD) prices increase to $5,100, coming back to the spotlight again. This move in gold prices reveals interesting insights about the global economy.
Here are the reasons why the gold prices are increasing again and what you need to know this week.
The China Factor
The major reason behind the increase in gold prices is linked with the East, as the new data indicates that the People’s Bank of China has increased its gold buying streak for a consecutive 15th month.
In January, China added 40,000 troy ounces to its reserves, increasing its total holdings to over 74 million ounces. The world’s largest institute investing in gold gives a powerful message about the metal’s long-term value.
Pressure on the Federal Reserve
The US dollar is experiencing the heat, bringing good news for the yellow metal. Investors are continually betting that the Federal Reserve will be pressured to decrease the interest rates multiple times throughout 2026.
Moreover, the rising debate over the Fed’s independence is also fuelling the rise in gold prices. Since investors are expecting a dovish shift after President Donald Trump’s warnings to take legal actions against the Fed’s Chair and nominating Kevin Warsh, if the rates are not decreased. The weakening dollar and lower interest rates make gold a more attractive metal to hold.
The Tug of War
The skies are not clear for gold bulls as the analysts see an ongoing tug of war within the market. In the Bullish case, the central bank and de-dollarization are maintaining the prices high. On the other hand, in the bearish case, de-escalation of tension in the Middle East after diplomatic talks between the US and Iran in Oman has increased risk-on sentiments. People, when they feel safe, will take out the money from gold and start investing again in the stock market.
What’s Next
Currently, the traders are not committing anything as they are waiting for the release of two massive reports later this week, as they will play a significant role in determining gold’s next move:
- On Wednesday, the delayed Nonfarm Payroll(NFP) report will indicate the health of the US labour market
- On Friday, the latest Consumer Inflation(CPI) statistics will inform whether the Fed will cut the rates aggressively, according to the wide expectations within the market.
Read: Kiwi Resilience: Why the NZD/USD is Holding Strong Above 0.6000
Final Thoughts
At this time, “gold” appears to be trying to break important resistance lines. If it breaks above the recent price averages cleanly, it opens the potential to create a huge influx of new buying. China is leading this effort, but as the U.S. dollar declines, “gold” will continue to be viewed as the ultimate gauge of global stability.
