Gold Price Forecast: XAU/USD holds record-rally amid overbought conditions, ahead of US data


  • Gold price sits at highest level on record above $2,850 early Wednesday.    
  • Uncertainty over US President Trump’s tariffs, impending US-Sino trade war underpin Gold price.  
  • Deteriorating risk sentiment on China return could revive the haven demand for the US Dollar.
  • Overbought conditions on the daily chart continue to caution Gold buyers ahead of US jobs data.

Gold price is holding the record-setting rally early Wednesday, hanging close to the levels seen ever near $2,850. Traders gear up for the upcoming US private sector employment data and US-China trade talks for Gold price action.

Gold price keeps an eye on US data and US-China trade talks

The buying interest around the traditional store of value, the Gold price, remains unabated so far this week, courtesy of the growing uncertainties over US President Donald Trump’s tariff policies and their impact on the global growth and inflation outlook.

The Trump administration's tariff pushback on Canada and Mexico for a month and the US-Sino trade war keep investors on edge, especially with Chinese traders returning after a week-long Lunar New Year holiday.

A mixed set of US economic data releases in the ISM Manufacturing PMI and the Jobs Openings survey help maintain the bets for two US Federal Reserve (Fed) interest rate cuts this year even as Fed policymakers express caution on further rate cuts. This remains supportive of the non-interest-bearing Gold price.

However, the Gold price could face a headwind in the near term if the US succeeds in ending the Israel-Hamas geopolitical conflict. Israeli Prime Minister Benjamin Netanyahu and Trump met on Tuesday at the White House and discussed the elimination of Hamas, Iran strategy and renewed Israel-Saudi normalization.

The 47th American President, however, expressed uncertainty on whether the ceasefire deal between Hamas and Israel will hold. “ Gold tends to benefit in times of geopolitical instability and market turmoil.

Looking ahead, the impending trade talks between US President Donald Trump and his Chinese counterpart Xi Jinping are eagerly awaited. White House spokeswoman Karoline Leavitt told reporters that a Trump-Xi call still needed to be scheduled. "President Xi did reach out to President Trump to speak about this, maybe to begin a negotiation. So we'll see how that call goes," Leavitt told Fox Business Network earlier on Tuesday.

In the meantime, the US employment data might reclaim the spotlight, given the increasing uncertainty around the Fed’s scope and timing of interest rate cuts. The US ADP Employment Change is seen arriving at 150K in January after registering 122K in December. Later in American trading, the US ISM Services PMI data will also offer fresh trading impetus, followed by speeches from Fed policymakers Austan Goolsbee and Michelle Bowman.

 Gold price remains at the mercy of the US Dollar (USD) dynamics amid a cautious market environment heading into the US data releases.

Gold price technical analysis: Daily chart

The daily chart warrants caution for Gold optimists as the 14-day Relative Strength Index (RSI) remains within the overbought territory, currently near 75.

If buyers face exhaustion, a pullback could be in the offing before the uptrend resumes.

If a correction sets in, Gold price could challenge the $2,800 round level, below which the February 3 low of $2,772 will be tested.

Additional declines will put the January 30 low of $2,754 at risk. The last line of defense for buyers is seen at the 21-day SMA at $2,731.

However, the 50-day Simple Moving Average (SMA) and 100-day SMA Bull Cross keep hopes alive for buyers.

On the upside, the Gold price needs a daily candlestick closing above the $2,850 psychological level to refresh record highs near $2,880 en route to the $3,000 round level.

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Read more.

Next release: Wed Feb 05, 2025 13:15

Frequency: Monthly

Consensus: 150K

Previous: 122K

Source: ADP Research Institute

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD holds lower ground near 1.0450, awaits German ZEW survey

EUR/USD holds lower ground near 1.0450, awaits German ZEW survey

EUR/USD holds lower ground near 1.0450 in the European morning on Tuesday. This downside could be attributed to the renewed have demand for the US Dollar amid a risk-off market mood and US rising Treasury bond yields. The focus is on German ZEW and US-Russia talks. 

EUR/USD News
GBP/USD holds above1.2600 after UK labor market data

GBP/USD holds above1.2600 after UK labor market data

GBP/USD struggles to attract buyers but holds above 1.2600 in the European session on Tuesday. The data from the UK showed that the ILO Unemployment Change remained unchanged at 4.4% in the three months to December, coming in better than the market expectation of 4.5%.

GBP/USD News
Gold price struggles to capitalize on intraday gains amid modest USD strength

Gold price struggles to capitalize on intraday gains amid modest USD strength

Gold attracts buyers for the second straight day amid concerns about a global trade war. Bets that the Fed would cut rates further lend support to the non-yielding yellow metal. Rebounding US bond yields and a modest USD uptick do little to cap XAU/USD.

Gold News
Storj bulls aiming for double-digit gains

Storj bulls aiming for double-digit gains

Storj, an open-source platform that leverages the blockchain to provide end-to-end encrypted cloud storage services, continues to trade higher by 4.4%, around $0.39 on Tuesday after rallying 5% the previous day.

Read more
Rates down under

Rates down under

Today all Australian eyes were on the Reserve Bank of Australia, and rates were cut as expected. RBA Michele Bullock said higher interest rates had been working as expected, slowing economic activity and curbing inflation, but warned that Tuesday’s first rate cut since 2020 was not the start of a series of reductions.

Read more
The Best Brokers of the Year

The Best Brokers of the Year

SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025