Gold Breaks Through the $5,000 Mark: Geopolitical Risks and Safe-Haven Funds Boosting Together

Spot gold rebounded strongly to return to the $5,000 level earlier this month, reaching a high of $5,028 during trading, with a daily increase of over 6%, marking the largest gain since the 2008 financial crisis. Behind this surge are both the escalation of Middle East geopolitical tensions and a global flight to safety, reflecting market reassessment of the dollar policy outlook.

Middle East Tensions Rise, Safe-Haven Buying Flows into Gold and USD Assets

Geopolitical risks have become the most direct catalyst for gold’s rise. U.S. military shot down an Iranian drone near an aircraft carrier in the Arabian Sea, sparking concerns of further escalation in Middle East conflicts. Although the Trump administration emphasizes ongoing diplomatic efforts and the White House confirms high-level US-Iran talks are scheduled for Friday, short-term geopolitical uncertainties have already attracted significant funds into traditional safe-haven assets.

Data from the World Gold Council shows that global gold ETF inflows hit a new high this year over the past week, and central bank gold purchases remain robust. This indicates that professional investors and central banks are preparing for potential risks, with gold, the oldest safe-haven asset, once again becoming the preferred target for capital. Meanwhile, policy uncertainties surrounding the dollar have pushed up real gold yields, further strengthening upward momentum in gold prices.

Fed Policy Shift, Dollar Appreciation Expectations Adjusted

Market expectations for the Fed’s rate cut pace have shifted subtly, partly due to personnel changes in policy. The Trump administration officially nominated hawkish candidate Kevin Warsh to succeed as Fed Chair, easing fears of rapid easing. According to CME FedWatch Tool data, the probability of two rate cuts this year has fallen to 65%, with one expected in June and another by year-end.

If Warsh is confirmed by the Senate, the Fed’s policy may turn more cautious, supporting the dollar exchange rate but also enhancing gold’s long-term appeal as an inflation hedge. With interest rate expectations remaining relatively stable, the opportunity cost of holding non-yielding gold decreases, prompting institutional investors to build positions.

U.S. Data Vacuum Amplifies Safe-Haven Sentiment, Gold Rises

The ongoing government shutdown has delayed key employment data releases, including the JOLTS job openings report and non-farm payrolls. Analysts note that data vacuums often amplify market risk aversion, with gold typically outperforming stocks and cryptocurrencies in such environments. Earlier this week, gold retreated nearly 8% on profit-taking, falling below $4,800, but quick dip-buying reversed the decline, leading to a rapid rebound and new highs within just a few trading days.

This swift buying response reflects strong market optimism about gold’s prospects, especially amid rising macro uncertainties, with safe-haven funds more inclined to buy on dips.

Technical Outlook Remains Bullish, Gold’s Upside Space Widens

From a technical perspective, the bullish trend remains solid. The short-term trendline at $5,025 and the previous high zone have proven effective support. As long as this level holds, the market expects gold to continue its upward trajectory. The recent correction is viewed as a healthy technical adjustment, with no clear signs of weakening buying momentum.

Investors should focus on key intraday levels: upside targets at $5,069, $5,106, and $5,167; downside supports at $4,953, $4,912, and $4,852. Goldman Sachs recently raised its 2026 gold target to $5,500, citing persistent geopolitical risk premiums, steady central bank gold purchases, and potential long-term dollar weakness.

Risk Warnings and Investment Strategies

UBS warns that if US-Iran talks achieve significant breakthroughs or if delayed data releases indicate a strong economy, gold could face profit-taking. Short-term volatility is normal, and investors should be prepared. Overall, the current bullish momentum remains strong, with the $5,000 psychological level now firmly acting as a solid support.

Investors are advised to closely monitor Friday’s US-Iran talks and House funding vote results. As long as gold’s support levels remain intact, it may present opportunities for buying on dips. Regardless of dollar movements, gold driven by safe-haven demand still has room for short-term gains.