Gold Ignores Every Reason to Pull Back — What It Means for the Next Leg Higher
LONDON (January 26) Gold hit a record $5,100 per ounce and silver casually added another 5% to $110. The latest gains seem to have been driven by ongoing dollar weakness and yen intervention signs, not to mention shaky confidence in fiat currencies as a whole, which has been the main driver behind gold all these years. There is also the persistence of global policy uncertainty pushing capital into hard assets. The list of positive factors driving gold is almost endless, but even the most bullish of traders must be wondering when will this rally come to at least a temporary halt. After all, it must be very tempting for gold and indeed silver holders to think about taking profit at these extremely overextended levels. But for the time being prices are refusing to roll over, and that in itself is becoming the story, because despite the fact that some of the obvious geopolitical risk premium has eased, investors are still evidently happy to keep pushing gold and silver higher. Trump’s U-turn on tariffs last week should, in theory, have taken some of the shine off safe-haven assets. But gold barely blinked, and instead got even stronger.
US Dollar Weakness
On the surface, part of the explanation is straightforward. The US dollar has been under pressure, and that’s providing gold with a natural tailwind. A weaker dollar makes gold cheaper for non-US buyers, and we’re seeing that play out across the board. But this doesn’t feel like a simple FX translation story. Gold priced in euros and pounds has also been moving higher, which tells you demand is broader and more structural than just currency effects.
Still, the dollar story is undoubtedly helping the metal. The greenback has slumped following last week’s geopolitical fracturing, and now the suspected Japanese intervention in USD/JPY has added another layer of pressure. Markets are increasingly convinced that Japanese authorities stepped in when USD/JPY pushed above 159, and the real kicker was reports that the Federal Reserve was “rate checking” banks in New York around the London close. The possibility that this wasn’t just Tokyo acting alone, but potentially coordinated with Washington, is a big deal. Bilateral Japan–US intervention is a much more powerful signal than Japan selling dollars on its own.
Bullish Momentum
Momentum is also doing a lot of the heavy lifting. This remains a very strong uptrend, and trend-following behaviour is clearly dominant. Traders are buying dips, not selling rallies, and as long as that dynamic holds, it’s hard to argue against higher prices in the near term.
Psychologically, the $5,000 level has now broken. It sounded ambitious just a few trading sessions ago, but so did $4,000 not that long ago. When you combine strong technical momentum with a weakening dollar narrative and growing unease in global bond markets, those big round numbers stop looking unrealistic.
That said, it’s still worth keeping one eye on the macro fundamentals. Real yields, growth expectations and inflation dynamics haven’t disappeared, and at some point they will matter again. When they do, gold could struggle to justify these levels without a deeper systemic risk story.
Key Levels to Watch
For now, though, the path of least resistance still looks higher. The next upside target sits around $5182, marking the 261.8% Fibonacci extension level of the last major downswing that took place in October, with the next round handle of $5,200 looming just beyond. On the downside, there are lots of support levels to watch with $5,000 now being the first. Round handles like $4,900, $4,800 etc., are also potential support levels to watch, with key longer-term support coming in around the $4,500–$4,550 area now.
As long as the dollar remains under pressure and central banks are remaining net buyers of gold, and governments openly flirting with FX intervention, it’s hard to see what really forces gold to roll over at this stage apart from the impact of profit-taking.
Investing.com
