Gold Weekly Forecast: Volatility persists in commodity space
- Gold fluctuated in a wide range after starting the week under heavy pressure.
- CME raised margins on precious metals amid heightened volatility.
- US inflation and employment data could trigger a big reaction in Gold prices.
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data for January, which could influence the market pricing of the Federal Reserve’s (Fed) policy outlook and impact Gold’s performance.
Gold recovers following intense selloff
The commodity selloff triggered by US President Donald Trump’s announcement last Friday that he nominated Kevin Warsh, who served as a Federal Reserve Governor from 2006 to 2011, as the new chair of the Fed, continued at the beginning of the week. Gold touched its lowest level since early January near $4,400 early Monday before erasing a portion of its daily losses in the second half of the day.
Late Monday, the US Bureau of Labor Statistics (BLS) announced it would not release data due to the partial government shutdown. “The Job Openings and Labor Turnover Survey release for December 2025, Metropolitan Area Employment and Unemployment release for December 2025, and the Employment Situation release for January 2026 will be rescheduled upon the resumption of government funding,” Emily Liddel, associate commissioner for the BLS’ Office of Publications and Special Studies, explained. The US Dollar (USD) came under bearish pressure and helped XAU/USD gather bullish momentum. Additionally, dip-buying might have provided an additional boost to Gold, which rose more than 6% on a daily basis.
As the US House passed a package late Tuesday to end the partial government shutdown, Gold’s recovery lost momentum midweek. Meanwhile, the USD benefited from the poor performance of equity indexes and capped XAU/USD’s upside, despite mixed data releases. The Automatic Data Processing (ADP) reported that employment in the private sector rose 22K in January, missing the market expectation of 48K. On a positive note, the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) held steady at 53.8, reflecting an ongoing expansion in the service sector's business activity at a healthy pace.
On Thursday, the USD continued to gather strength as the selloff in stock markets continued. Furthermore, the Bank of England’s (BoE) dovish tone and the European Central Bank’s (ECB) neutral stance helped the USD capture capital outflows out of Pound Sterling (GBP) and the Euro (EUR). The BoE maintained the bank rate at 3.75%, as expected, but four members of the Monetary Policy Committee voted for a rate cut. Meanwhile, ECB President Christine Lagarde reiterated that they don’t have an exchange rate target for the EUR, but acknowledged that a stronger EUR could bring inflation down more than expected.
After falling nearly 4% and retracing a large portion of its weekly rebound on Thursday, Gold regained its traction on Friday. The CME Group, once again, hiked margin requirements for Gold and Silver futures contracts late Thursday, helping prices rebound.
Gold traders await key US data
The US Bureau of Labor Statistics (BLS) will publish the January employment report on Wednesday. Investors expect Nonfarm Payrolls to rise 70K following the 50K increase recorded in December, and see the Unemployment Rate holding steady at 4.4%.
The CME FedWatch Tool shows that markets are pricing in about a 23% probability of a 25 basis points (bps) Fed rate cut in March. A significant negative surprise in the NFP print, at or below 25K, combined with an uptick in the Unemployment Rate, could cause markets to lean toward a Fed rate cut next month. In this scenario, Gold could push higher with the immediate reaction. Conversely, a better-than-forecast NFP print could support the USD and make it difficult for XAU/USD to keep its footing.
On Friday, the Consumer Price Index (CPI) data for January will be watched by investors. On a monthly basis, the core CPI is projected to rise 0.3%. The market reaction to the core inflation data is likely to be straightforward and remain short-lived, with a core CPI print of 0.4% or higher, boosting the USD and weighing on XAU/USD and vice versa.
In the meantime, market participants will pay close attention to the action in the commodity space as a whole. On Thursday, Silver (XAG/USD) lost nearly 20% on a daily basis, possibly intensifying the selling pressure on Gold. Even if the macroeconomic environment hints at a weaker USD, Gold could struggle to attract buyers unless volatility dissipates and commodities quiet down.
BNY’s Head of Markets Macro Strategy Bob Savage highlights the significant outflows, nearly $1 billion, from China’s Gold ETFs as a sign of how shaky the precious metal’s footing is despite the noteworthy rebound seen in price.
"The abrupt reversal followed Gold’s pullback from an all-time high and its steepest single-day decline since 2013 during Asian trading on Friday, validating concerns that the rally had become overstretched,” Savage explains, and adds: "Although bullion recovered more than 6% on Tuesday as dip buyers returned, the scale of ETF outflows highlights how fragile sentiment remains."
Finally, the outcome of the US-Iran talks and the general election in Japan could drive Gold prices at the weekly opening. If markets remain concerned about a US-Iran direct conflict, Gold could find demand as a safe haven. While the general election in Japan is unlikely to have a direct impact on Gold price, a significant weakening in the Japanese Yen (JPY) could trigger an intervention from the Bank of Japan (BoJ) and cause the USD to come under a flash selling pressure, allowing XAU/USD to push higher.
Gold technical analysis
The Relative Strength Index on the daily chart seems to have stabilized above 50, reflecting a lack of bearish pressure in the near term. Additionally, Gold recovered above the 20-day Simple Moving Average (SMA) after closing below this level on Thursday.
On the upside, $5,000 (round level, psychological level) aligns as the first resistance level before $5,050 (Fibonacci 23.6% retracement of the November-February uptrend), $5,200 (static level) and $5,400 (static level, end-point of the uptrend).
Looking south, the first support level could be spotted at $4,830 (Fibonacci 38.2% retracement) before $4,660 (Fibonacci 50% retracement) and $4,550 (50-day SMA).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
