Gold remains heavily offered amid firmer USD; bears await break below $5,100 mark
|- Gold attracts fresh sellers on Friday on news of a deal to avoid a US government shutdown.
- The USD regains some positive traction and further contributes to the profit-taking slide.
- Threats to the Fed’s independence, trade jitters, and geopolitical risk support the commodity.
Gold (XAU/USD) again comes under heavy liquidation pressure on Friday, following the previous day's volatile price swings and against the backdrop of a series of record highs set over the past two weeks or so. The US Dollar (USD) gains some positive traction amid the optimism over a Senate deal to fund the federal government through the remainder of the fiscal year. This helps ease near-term political uncertainty and prompts the XAU/USD bulls to take some profits off the table, especially after the parabolic rise of more than 25% since the beginning of this month.
However, the risk of the Federal Reserve (Fed) losing its independence, along with prospects for lower US interest rates, might keep a lid on any meaningful USD appreciation and support the lower-yielding Gold. Meanwhile, US President Donald Trump's tariff threats and persistent geopolitical uncertainties continue to weigh on investors' sentiment. This is evident from the cautious mood around the equity markets and could support the safe-haven bullion. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD pair has topped out.
Daily Digest Market Movers: Gold profit-taking kicks in as USD scales higher amid funding deal optimism
- Democrats and the White House have struck a deal to temporarily fund the Department of Homeland Security as lawmakers rush to pass the spending package by Friday to avoid a partial US government shutdown. The US Dollar gets a minor boost in reaction to the news, prompting fresh selling around the Gold during the Asian session on Friday.
- Meanwhile, US President Donald Trump said on Thursday that he wanted to avoid using military force against Iran, further boosting investors' confidence. Market players, however, remain on edge amid Trump's threat to impose 50% tariffs on Canada-made aircraft until American-made Gulfstream jets receive certification in Canada.
- Trump took another jab at Federal Reserve Chairman Jerome Powell and said on Truth Social that the US central bank should substantially lower interest rates. The Fed, however, resisted the unprecedented political pressure and decided to leave rates unchanged on Wednesday while signaling that it would continue to adopt a cautious approach.
- Trump said that he will announce his choice to replace Jerome Powell as the next Fed chair on Friday morning amid the rising probability of Kevin Warsh's appointment. Nevertheless, investors remain worried about the freedom of monetary authorities from direct political interference in formulating policies, which should cap any further USD gains.
- On the geopolitical front, the US continues to deploy warships and fighter jets across the Middle East. Adding to this, US Secretary of War Pete Hegseth stated that America is fully prepared to act decisively under President Trump’s orders. This, in turn, raises the risk of a military confrontation and could also benefit the safe-haven commodity.
- Separately, Russia had reiterated its invitation for Ukrainian President Volodymyr Zelensky to come to Moscow for peace talks, though a deal remains elusive amid profound differences between the two countries' negotiating stances. In fact, Ukraine outright rejected Russia's demand to cede all of the Donbas region to end the nearly four-year war.
- Traders now look forward to the release of the US Producer Price Index (PPI), due later during the North American session. Apart from this, comments from influential FOMC members and the new Fed chair announcement will play a key role in driving the USD demand, which, in turn, should provide a fresh impetus to the non-yielding yellow metal.
Gold needs to find acceptance below ascending trend line and $5,100 to back case for further losses
The Moving Average Convergence Divergence (MACD) line on the 4-hour chart has slipped below the Signal line, and both stand beneath zero; the widening negative histogram suggests building bearish pressure. That said, the Relative Strength Index (RSI) at 50 tempers conviction, keeping momentum balanced near key supports. A rising trend line from $4,526.24 underpins the structure, offering support at $5,174.74; a sustained bounce from that area could reassert the recovery, while a close below it would expose deeper retracement levels.
Measured from the $4,261.33 low to the $5,594.20 high, the 38.2% retracement at $5,085.05 offers first support, with the 50% retracement at $4,927.77 below. If bears press through trend-line support, focus would shift to the 38.2% retracement, while a recovery could target the 23.6% retracement at $5,279.64; with MACD weak and RSI neutral, upside would need improving momentum to overcome nearby barriers.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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