Gold lacks bullish conviction as positive risk tone offsets Fed rate cut bets, softer USD
- Gold scales higher for the second straight day and draws support from a combination of factors.
- China's gold buying, dovish Fed bets, and a modest USD weakness continue to underpin the bullion.
- A positive risk tone acts as a headwind for the safe-haven XAU/USD as traders await key US data.
Gold (XAU/USD) extends its sideways consolidative price move above the $5,000 psychological mark through the first half of the European session on Monday, though it remains below last week's swing high amid mixed cues. Data released over the weekend showed that the People's Bank of China (PBOC) extended its buying spree for a 15th month in January. Moreover, dovish US Federal Reserve (Fed) expectations and concerns about the central bank's independence drag the US Dollar (USD) lower for the second straight day, providing an additional boost to the non-yielding yellow metal.
Meanwhile, signs of easing tensions in the Middle East boost investors' confidence, which is evident from a generally positive tone around the global equity markets. This, in turn, is seen acting as a headwind for the safe-haven Gold. Traders also seem reluctant to place aggressive directional bets and opt to wait for this week's important US macro releases – the delayed Nonfarm Payrolls (NFP) report on Wednesday and the latest consumer inflation figures on Friday. The crucial data will offer cues about the Fed's rate-cut path, which will drive the USD demand and the XAU/USD pair.
Daily Digest Market Movers: Gold bulls seem hesitant as undermines safe-haven demand
- Data from the People's Bank of China (PBOC) showed on Saturday that the central bank continued its gold purchases for the 15th straight month in January, highlighting steady demand amid fiscal concerns in major economies. China's gold holdings surged 40,000 troy ounces to 74.19 million last month, and the value of reserves increased to $369.58 billion.
- According to the CME Group's FedWatch Tool, traders are currently pricing in a greater possibility that the US Federal Reserve will lower borrowing costs at least more times in 2026. The bets were reaffirmed by last week's US data, which pointed to signs of weakness in the labor market and backed the case for further policy easing by the US central bank.
- US President Donald Trump said on Saturday that he might sue his newly selected Fed chair nominee, Kevin Warsh, if he didn’t lower rates. US Treasury Secretary Scott Bessent on Thursday refused to rule out the possibility of a criminal investigation of Kevin Warsh if he ends up refusing to cut interest rates, fueling concerns about the central bank's independence.
- Apart from this, the broader dedollarization trend drags the US Dollar lower for the second straight day, away from a two-week top touched last Thursday. This, in turn, drives some follow-through flows towards the non-yielding Gold at the start of a new week. However, the upbeat mood across the global equity markets acts as a headwind for the commodity.
- Despite differences over the agenda, indirect talks between the US and Iran on the future of the latter's nuclear program ended on Friday with a broad agreement to maintain a diplomatic path. This helps ease concerns about a military confrontation in the Middle East and boosts investors' appetite for riskier assets, capping the upside for the safe-haven precious metal.
- The XAU/USD bulls also seem reluctant ahead of the delayed release of the closely-watched US monthly jobs data – popularly known as the Nonfarm Payrolls (NFP) report on Wednesday. Apart from this, the US consumer inflation figures on Friday will play a key role in influencing the USD price dynamics and providing a fresh impetus to the XAU/USD pair.
Gold struggles to capitalize on strength beyond 200-hour SMA
The precious metal is flirting with the 200-hour Simple Moving Average (SMA) pivotal resistance, and a sustained strength above will be seen as a fresh trigger for bullish traders. The Moving Average Convergence Divergence (MACD) line remains above the Signal line and above zero, while the positive histogram is contracting, suggesting fading upside momentum.
The Relative Strength Index (RSI) prints 64 (bullish) without reaching overbought. The 200-hour SMA slopes lower, keeping the intraday tone offered and acting as immediate resistance. A sustained close back above the 200-period SMA would improve the near-term outlook, whereas rejection there would keep sellers in control.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
