Gold Price Forecast: XAU/USD Stabilizes Near $5,040 as China Buying and Fed Independence Fears Fuel Recovery
Gold (XAU/USD) started the second week of February with strong gains, moving toward $5,046. Its recovery from recent swings is supported...
Quick overview
- Gold (XAU/USD) is experiencing strong gains, approaching $5,046, driven by central bank demand and a weaker US Dollar.
- China's continuous gold purchases for 15 months have significantly contributed to the demand for gold, providing a safety net for its price.
- Concerns about the Federal Reserve's independence, fueled by political pressures, are causing the US Dollar to weaken and supporting higher gold prices.
- Geopolitical tensions, particularly regarding US-Iran negotiations, are adding volatility to the market, prompting investors to seek safe-haven assets like gold.
Gold (XAU/USD) started the second week of February with strong gains, moving toward $5,046. Its recovery from recent swings is supported by steady central bank demand, a weaker US Dollar, and growing concerns about the Federal Reserve’s independence.
Central Bank Dominance: China’s 15-Month Buying Spree
One of the main reasons for gold’s rally is ongoing demand from the People’s Bank of China (PBOC). New data shows that China has now bought gold for 15 months in a row, as of January.
- Total Holdings: China’s gold reserves rose to 74.19 million fine troy ounces.
- Market Impact: As the world’s largest gold consumer, China’s consistent diversification away from US Dollar-denominated assets provides a massive “demand floor” for XAU/USD, shielding it from deeper corrections.
Fed Independence in Jeopardy? The “Bessent-Warsh” Factor
The US Dollar is under pressure as traders react to surprising comments about US monetary policy. Treasury Secretary Scott Bessent recently did not rule out a possible criminal investigation into Kevin Warsh, President Trump’s nominee for Fed Chair, if Warsh refuses to lower interest rates in the future.
This possible threat to the Federal Reserve’s independence has worried institutional investors. When the Fed is seen as political, the US Dollar often weakens and inflation expectations rise, which usually supports higher gold prices.
Geopolitical Tensions: Trump, Iran, and the Safe-Haven Appeal
Economic factors are driving the overall trend, but geopolitical events are causing the recent volatility. Right now, markets are closely watching the US-Iran talks in Oman.
- The Progress: Iranian President Masoud Pezeshkian called recent meetings a “step forward.”
- The Threat: President Donald Trump has warned of “steep consequences” if a deal is not reached early this week.
In the past, when these important negotiations have failed, investors have quickly moved to safe-haven assets like Gold and Silver.
Technical Analysis: Gold (XAU/USD) Builds a Higher Base
Gold is now holding steady around $5,035 on the 2-hour chart. After dropping sharply from the $5,600 peak earlier this year, the price is starting to show signs of buyers coming back in.
| Level Type | Price Level | Technical Significance |
| Resistance 2 | $5,275 | Major swing high target |
| Resistance 1 | $5,095 | Key breakout level for bulls |
| Support 1 | $4,980 | Prior resistance flipped to support |
| Support 2 | $4,890 | 200-EMA & 50% Fibonacci level |
The RSI is close to 55, which means the market is balanced and there is still room for prices to move higher.
Trading Idea is to consider buying positions on a confirmed break above $5,100, targeting $5,275, with a protective stop placed below the $4,950 support zone.
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