Gold Forecast: XAU/USD Remains Firm as Geopolitical Risks Intensify

Gold continues to trade at record highs, extending its rally into the first half of Tuesday as investors lean further into safe-haven assets. The move higher has been driven by a sharp deterioration in global risk sentiment, with renewed geopolitical tensions between the United States and Europe adding to uncertainty. With both political and currency dynamics aligned, the near-term gold forecast remains constructive.

Macro and Geopolitical Drivers

The latest leg higher in gold has been fuelled by escalating transatlantic tensions. Former US President Donald Trump has reiterated his intention to pursue control of Greenland, while also threatening tariffs against European nations that oppose the move. This rhetoric has triggered strong reactions across Europe, with Germany warning that a red line has been crossed and reports suggesting the EU is actively weighing retaliatory tariffs on up to €93bn of US goods.

Markets are increasingly pricing the risk of a broader US–EU confrontation. Equity markets on both sides of the Atlantic have moved lower, US futures have softened, and demand for defensive assets has risen sharply. In this environment, gold has pushed further into uncharted territory as investors seek protection against rising political and policy uncertainty.

Dollar Weakness Reinforces the Gold Outlook

Adding to gold’s strength, the US dollar has resumed its decline across the FX complex. The so-called “Sell America” theme appears to be resurfacing, with the dollar weakening even against risk-sensitive commodity-linked currencies. A softer dollar continues to act as a key tailwind for precious metals, amplifying gold’s upside momentum at a time when confidence in US assets looks increasingly fragile.

Scenario Analysis: What Comes Next?

European leaders face a narrow and complex decision window. Diplomatic engagement remains the least disruptive path, and upcoming meetings at the World Economic Forum in Davos could offer an opportunity to de-escalate tensions. Should dialogue prove effective, risk assets may stabilise, and gold could see some near-term consolidation.

However, other options carry greater market risk. Delaying ratification of the EU–US trade deal agreed last summer would likely be viewed as an escalation, placing further pressure on equities and supporting additional safe-haven flows into gold.

The most severe scenario involves potential use of the EU’s anti-coercion instrument. While never intended for deployment against the United States, its discussion has gained traction, particularly in France. Activation would open the door to tariffs, market access restrictions, and limits on US investment in Europe. Such a move would significantly raise the risk of a full-scale trade conflict. While this would be clearly negative for equities, extreme volatility could also trigger short-term gold selling by leveraged participants seeking liquidity, even as the broader backdrop remains supportive.

Technical Outlook: Key Levels to Watch

From a technical perspective, the trend remains decisively bullish.

• Initial support is located at the recent breakout zone near $4,690.

• Below that, the $4,621 area, marked by last week’s hammer formation, is the next level of interest.

• A deeper pullback would bring $4,550 into focus, followed by the psychological $4,500 zone.

As long as the price holds above this broader support region, the bullish structure remains intact.

On the upside, resistance remains limited. Round-number levels at $4,800 and $4,900 are the next reference points, while the $5,000 level stands out as a longer-term psychological target.

XAU/USD Daily Chart

Bottom Line

With geopolitical uncertainty rising and the US dollar under sustained pressure, the broader gold forecast remains skewed to the upside. Unless there is a rapid de-escalation in political tensions, gold is likely to stay well supported as investors continue to hedge against an increasingly unstable macro backdrop.