Gold falls on firmer USD; shows resilience below $4,800 amid dovish Fed, geopolitics
- Gold meets with a fresh supply during the Asian session amid some follow-through USD buying.
- Dovish Fed bets could cap the USD and support the commodity amid geopolitical uncertainties.
- Traders now look to a duo of US labor market reports for a short-term impetus later this Thursday.
Gold (XAU/USD) attracts heavy selling following the overnight failure ahead of the $5,100 mark and dives to sub-$4,800 levels during the Asian session on Thursday. The US Dollar (USD) climbs to a two-week high and looks to build on its recent goodish recovery move from a four-year low, which, in turn, exerts some downward pressure on the commodity. Furthermore, the state-backed association reported a fall in China's gold consumption in 2025, which further contributes to the steep intraday decline.
On the geopolitical front, Iran and the US have agreed to hold talks in Oman on Friday, easing concerns about a broader military confrontation and further undermining the safe-haven Gold. Meanwhile, Wednesday's softer US ADP report pointed to labor market weakness and strengthened the case for interest rate cuts by the Federal Reserve (Fed). This might hold back the USD bulls from placing aggressive bets and act as a tailwind for the non-yielding yellow metal, warranting caution for aggressive bears.
Daily Digest Market Movers: Gold bears seem non-committal as dovish Fed bets and geopolitical risks offset firmer USD
- China's gold consumption in 2025 fell 3.57% to 950.096 metric tons, the state-backed association said on Thursday. Gold output using domestic raw materials climbed 1.09% year on year to 381.339 metric tons, the association added.
- US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair fueled speculation that the central bank will be less dovish than expected. This assists the US Dollar in gaining some follow-through positive traction.
- Trump, however, said that he would have passed on Kevin Warsh as his nominee for the Fed Chair if he had expressed a desire to hike interest rates and that there was not much doubt that the US central bank would lower interest rates.
- Moreover, traders are still pricing in the possibility that the Fed will lower borrowing costs two more times this year. The bets were further reaffirmed by Wednesday's disappointing release of the US private-sector employment data.
- In fact, the Automatic Data Processing (ADP) Research Institute reported that private-sector employers added 22K new jobs in January, down from the previous month's downwardly revised reading of 37K and 48K consensus estimates.
- Separately, the US ISM Services PMI held steady at 53.8 in January and pointed to another robust expansion in the sector, providing a modest lift to the USD and exerting pressure on the Gold during the Asian session on Thursday.
- Meanwhile, Iran and the US remain at odds over the latter's demand that negotiations cover Tehran's missile arsenal and Iran's insistence on discussing only its nuclear program. This could further act as a tailwind for the safe-haven commodity.
- Analysts at UBS in a recent note rated gold as an attractive hedge and suggested that the bull market is not yet over, projecting that prices can rise to $6,200 an ounce (oz) by mid-2026, up nearly 25% from the current levels.
- Traders now look to Thursday's US economic docket, featuring the release of the delayed JOLTS Job Openings data and the usual Weekly Initial Jobless Claims. This, along with Fed speak, could influence the buck and the XAU/USD pair.
Gold needs to move back above $5,000 to shift the near-term bias in favor of bullish traders
The overnight failure ahead of the $5,100 mark and the subsequent downfall back the case for a further near-term depreciating move for the Gold. The Moving Average Convergence Divergence (MACD) line stands above the Signal line and above zero, while a contracting positive histogram suggests momentum is cooling. The Relative Strength Index (RSI) prints at 46, neutral and below its midline.
However, the 200-period Simple Moving Average (SMA) rises to $4,677.91, with the Gold price holding above it and retaining an upside bias. Measured from the $5,597.45 high to the $4,390.81 low, the 50% retracement level at $4,994.13 acts as initial resistance, and a breakout could target the 61.8% Fibonacci retracement at $5,136.51. A close above the said hurdle would strengthen the bullish tone and open the way for further recovery.
Near-term traction is mixed as MACD’s positive bias eases and RSI remains sub-50, keeping price action contained below nearby resistance. Failure to clear $4,994.13 would keep the range intact, while dips would be cushioned by the rising 200-period SMA around $4,677.91.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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