Gold rebounds from $4,655 area amid weaker risk tone, Fed rate cut expectations
- Gold attracts some dip buyers on Friday following an Asian session decline to a four-day low.
- A turnaround in the risk sentiment and Fed rate cut bets act as a tailwind for the precious metal.
- The USD preserves its recent strong recovery gains and limits the upside for the XAU/USD pair.
Gold (XAU/USD) rebounds swiftly from the vicinity of mid-$4,600s, or a four-day trough touched during the Asian session on Friday, though it lacks follow-through. A turnaround in the risk sentiment – as depicted by a sea of red across the global equity markets – drives flow toward traditional safe-haven assets and acts as a tailwind for the commodity. Moreover, bets on more interest rate cuts by the US Federal Reserve (Fed) in 2026, bolstered by signs of weakness in the US job market, turn out to be another factor offering support to the non-yielding yellow metal.
Meanwhile, the White House said that diplomacy is US President Donald Trump's first choice for dealing with Iran, but warned that he has military options at his disposal. This keeps geopolitical risks in play and further underpins the safe-haven Gold. That said, expectations that the incoming Fed Chair Kevin Warsh will be less dovish assist the US Dollar (USD) to preserve its recent recovery gains from a four-year low and cap the upside for the precious metal. This makes it prudent to wait for strong follow-through buying before placing fresh bullish bets around the XAU/USD pair.
Daily Digest Market Movers: Gold bears seem hesitant as flight to safety and Fed rate cut bets counter USD strength
- Asian stocks extended losses into a second day as a selloff on Wall Street intensified amid a global rout in tech equities. Adding to this, prospects for lower interest rates in the US assist the non-yielding Gold to reverse an Asian session slide to the $4,655 area on Friday.
- According to the CME Group's FedWatch Tool, traders are currently pricing in the possibility that the US Federal Reserve will deliver at least two 25-basis-point rate cuts in 2026. The bets were reaffirmed by this week's US data, which pointed to weakness in the labor market.
- The Automatic Data Processing (ADP) Research Institute reported on Wednesday that private-sector employers added 22K new jobs in January. This marked a notable decline from the previous month's downwardly revised reading of 37K and missed estimates of a 48K rise.
- Adding to this, the Job Openings and Labor Turnover Survey (JOLTS) released on Thursday revealed that the number of job openings on the last business day of December stood at 6.542 million, compared to the previous month's downwardly revised print of 6.928 million.
- Furthermore, the US Department of Labor reported that the number of citizens submitting new applications for unemployment insurance rose to 231K for the week ending January 31 from the previous week’s 209K. The reading was also higher than estimates for a rise to 212K.
- Meanwhile, US President Donald Trump said on Thursday 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. Trump added that there was not much doubt that the US central bank would lower rates.
- The White House press secretary Karoline Leavitt told reporters that diplomacy is Trump's first choice for dealing with Iran, and he will wait to see whether a deal can be struck at high-stakes talks on Friday amid differences over the agenda, keeping geopolitical risks in play.
- Later during the North American session, traders will take cues from the preliminary Michigan Consumer Sentiment Index and Inflation Expectations. This, along with comments from influential FOMC members, would drive USD demand and the XAU/USD pair.
Gold consolidates between 50- and 200-SMAs on H4 amid a mixed technical setup
The overnight failure to build on momentum beyond the 50-period Simple Moving Average (SMA) on the 4-hour chart favors bearish traders. The subsequent fall, however, finds decent support near the 200-period SMA, warranting some caution. Meanwhile, the 50-period SMA remains above the 200-period SMA, which continues to rise, sketching a mixed backdrop and keeping a consolidative bias within the broader uptrend.
The Moving Average Convergence Divergence (MACD) line holds below the Signal line near the zero level. Its negative but contracting histogram suggests fading bearish momentum, while the Relative Strength Index (RSI) prints 45 (neutral). Near-term traction would improve on a close back above the 50-period SMA at 5,026.76, with that level acting as initial resistance, whereas failure to stabilize risks a drift toward the 200-period SMA at 4,691.87, which serves as dynamic support.
A MACD move back above the Signal line and into positive territory, alongside an RSI break through 50, would bolster the recovery; otherwise, momentum remains capped, and price could continue consolidating between these averages.
(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.