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Gold Price Forecast: XAU/USD weakens as safe-haven demand fades on Trump's U-turn

  • Gold retreats from the all-time peak as easing trade war fears undermine safe-haven assets.
  • Receding ‘Sell America’ trade acts as a tailwind for the USD and further weighs on the metal.
  • Traders look to the US PCE Price Index for Fed rate cut cues and a fresh directional impetus.

Gold (XAU/USD) extends the overnight pullback from the vicinity of the $4,900 mark, or a fresh all-time peak, and drifts lower through the Asian session on Thursday, snapping a three-day winning streak. The global risk sentiment gets a strong boost in reaction to US President Donald Trump's U-turn on Greenland and easing geopolitical tensions. This prompts some profit-taking around the safe-haven commodity amid overbought conditions and ahead of the crucial US inflation data.

During his appearance at the World Economic Forum in Davos, Trump pulled back from his threat to slap additional tariffs on eight European nations and ruled out seizing Greenland by force. Trump said that he had reached an agreement on a framework for a future deal on Greenland with NATO that would satisfy his desire for a missile defence system and access to critical minerals. Moreover, Trump wrote on Truth Social that he will not be imposing tariffs that were scheduled to go into effect on February 1. This removes the tail risk of a US confrontation with NATO allies and eases trade war fears. The S&P 500 rose sharply in reaction to the development, and the spillover effect lifts Asian equities on Thursday, which, in turn, undermines the safe-haven Gold.

Meanwhile, the European Parliament members blocked a vote to ratify a US-European trade deal agreed in July. Nevertheless, the so-called 'Sell America' trade seems to have receded amid hopes that trade conflict with Europe is unlikely to re-escalate. Furthermore, a Reuters poll showed that a majority of economists expect the US Federal Reserve (Fed) will hold its key interest rate through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May. This assists the US Dollar (USD) in preserving the overnight gains and turns out to be another factor weighing on the Gold. That said, traders are still pricing in the possibility of two more rate reductions in 2026. Moreover, concerns about political interference in the Fed's independent setting of rates cap the USD.

Traders also seem reluctant and opt to wait for Thursday's release of the US Personal Consumption Expenditure (PCE) Price Index for more cues about the Fed's future policy path. Apart from this, the final US Q3 GDP growth report will play a key role in influencing the near-term USD price dynamics and providing a fresh directional impetus to the non-yielding yellow metal. Meanwhile, the aforementioned fundamental backdrop warrants some caution for the XAU/USD bulls amid still overbought conditions on short-term charts.

XAU/USD 1-hour chart

Chart Analysis XAU/USD

Technical Analysis:

The 100-period Simple Moving Average (SMA) rises and sits at $4,711.55, with the Gold holding above it to preserve a bullish undertone. The Moving Average Convergence Divergence (MACD) line remains below the Signal line, and both sit beneath zero, while a contracting negative histogram suggests fading bearish pressure. The Relative Strength Index (RSI) prints 46 (neutral) and edges higher, aligning with a stabilizing tone.

Measured from the $4,535.22 low to the $4,889.37 high, the 38.2% Fibonacci retracement level at $4,754.08 offers initial support, with the 23.6% Fibo. level at $4,805.79 acting as the near-term pivot. A decisive push above the pivot would reinforce the bullish bias, while a break below initial support would expose the 50% retracement at $4,712.29.

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

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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