Gold Price Forecast: XAU/USD traders cash in as Trump set to announce Fed Chair pick

Gold corrected steeply early Friday after failing to hold above the $5,400 nark.
The US Dollar stages a solid comeback but remains poised for a second weekly slide.
Gold, still overbought, looks to test the $5,000 demand zone on an extended correction from record highs.

Dhwani Mehta FXStreet

Gold is seeing a deep correction early Friday, challenging bids near the $5,100 kevel, following intense volatility witnessed on Thursday.

Gold eyes deeper pullback ahead of Trump’s Fed Chair pick

Gold is down nearly 3% so far this Friday, yet on track for the largest monthly advance since January 1980.

The latest corrective pullback could be attributed mainly to a strong comeback staged by the US Dollar (USD) across the board. A cocktail of factors emerges as a tailwind to the Greenback, offering a much-needed reprieve.

The Wall Street Journal (WSJ) reported that US President Donald Trump and Senate Democrats struck a deal to avert a government shutdown, lending support to the buck.

Additionally, the Fed’s cautious hold decision and profit-taking following the recent meltdown to four-year lows collaborate to the USD’s resurgence heading into Trump’s announcement of the US Federal Reserve (Fed) Chair pick due later in the American morning on Friday.

The Trump administration is preparing to nominate former Fed Governor Kevin Warsh to be the next Chair, Bloomberg reported on Friday.

Despite the sharp correction in the bright metal, bargain hunting cannot be ruled out as geopolitical risks remain elevated between the US and Iran, while markets digest the latest tariff threats by Trump on Cuba and Canada.

The White House said that Trump signed an executive order that would impose tariffs on countries that provide oil to Cuba, per Reuters.

Looking, Trump’s announcement of his Fed Chair pick and US Producer Price Index (PPI) data are eagerly awaited for the next critical move in Gold.

Gold price technical analysis: Daily chart

In the daily chart, XAU/USD trades at $5,195.05. The 21-day Simple Moving Average (SMA) rises above the 50- and 100-day, while the 200-day SMA also trends higher. Price holds above these averages, reinforcing a bullish bias. The Relative Strength Index (RSI) is at 72.07 (overbought), with momentum still firm. Immediate support is at the 21-day SMA at $4,764.72.

Shorter SMAs remaining stacked above longer ones underscore the prevailing uptrend, with the 50-day SMA at $4,481.84 underpinning the structure. The 100- and 200-day SMAs continue to advance, confirming the broader positive slope. RSI stays elevated, which could cap near-term upside and favor consolidation rather than reversal. Pullbacks would be expected to find support near the 50-day SMA, while sustained trade above the short-term averages keeps the path of least resistance to the upside.

(The technical analysis of this story was written with the help of an AI tool.)

(This story was corrected on January 30 at 4:12 GMT to say in the first bullet point that "Gold corrected steeply early Friday, not correctly steeply.)

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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