Gold faces rejection near $4,900 as bets for less dovish Fed counter supporting factors
|- Gold attracts strong 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) struggles to capitalize on a goodish intraday recovery move from the vicinity of mid-$4,600s, or a four-day low, and faces rejection near the $4,900 mark amid mixed cues. A turnaround in the global risk sentiment drives flow toward traditional safe-haven assets and acts as a tailwind for the commodity. Furthermore, 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 other factors supporting the non-yielding yellow metal.
Adding to this, the emergence of some US Dollar (USD) selling provides an additional lift to the precious metal. Meanwhile, the White House said that diplomacy is US President Donald Trump's first choice for dealing with Iran, though it warned that he has military options at his disposal. This keeps geopolitical risks in play and further underpins the safe-haven Gold. However, expectations that the incoming Fed Chair, Kevin Warsh, will be less dovish might cap the non-yielding yellow metal, warranting some caution for bullish traders.
Daily Digest Market Movers: Gold bulls seem hesitant as less dovish Fed bets counter safe-haven flows, USD downtick
- 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 might struggle to capitalize on the solid intraday recovery amid mixed 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.)
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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