Gold (XAU/USD) is attracting some bearish buyers after the previous day’s modest decline and climbed back above the $5,050 level during Wednesday’s Asian session. The prospects for lower U.S. interest rates are keeping the U.S. dollar (USD) at its lowest level in over a week, providing a tailwind for the unprofitable yellow metal. However, the underlying bullish sentiment may limit the advantage of the safe-haven commodity. Investors may also choose to wait for the release of the U.S. Nonfarm Payrolls (NFP) report before making up-to-date directional bets.
The U.S. Census Bureau reported Tuesday that retail sales were unchanged in December. The printing followed an augment of 0.6% recorded in November and was weaker than market expectations assuming an augment of 0.4%. This comes on top of signs of weakness in the US labor market and led economists to lower their estimates of economic growth in the fourth quarter, boosting hopes for further interest rate cuts by the US Federal Reserve (Fed). In fact, money markets are pricing in 58 basis points (bps) of Fed monetary easing in 2026, which continues to weaken the dollar.
Meanwhile, concerns about the Fed’s independence resurfaced after U.S. President Donald Trump said on Saturday that he might sue his newly elected Fed chairman, Kevin Warsh, if he does not cut interest rates. Moreover, Fed Governor Stephan Miran noted that 100% independence of the central bank is impossible. This overshadowed the hawkish comments of the duo of regional Fed governors – Lorie Logan and Beth Hammack – and gave no respite to American bulls. This, in turn, suggests that the path of least resistance for gold remains up.
Dallas Fed President Lorie Logan said the labor market was stabilizing with downside risks fading and inflation remaining above the 2% target for nearly five years. Logan further noted that the current political stance may be very close to neutral, implying little restraint. Moreover, Cleveland Fed President Beth Hammack said the Fed’s current target rate is near neutral and the central bank is well-positioned on policy to see how the situation develops. Hammack added that Fed interest rate policy may be on hold “for an extended period of time” because inflation is still too high and tariff issues remain unresolved.
XAU/USD bulls seem reluctant to make aggressive bets, however, and may decide to wait for monthly U.S. employment data to get more clues on the Fed policy outlook. This, in turn, will play a key role in influencing near-term USD price dynamics and provide significant stimulus to the commodity. In the meantime, continued underlying bullish sentiment, along with signs of easing tensions in the Middle East, could keep gold under control as a protected haven. Therefore, it may be wise to wait for further robust buying before positioning for further gains.
Gold needs to break above the resistance zone at $5,090 to support this case for additional gains
From a technical perspective, the XAU/USD pair showed some resistance earlier this month below the 200-period uncomplicated moving average (SMA) on the 4-hour chart. The mentioned SMA continues to rise and is well below the price, reinforcing the underlying bullish sentiment. Staying above this average will make the path slope higher.
However, the moving average divergence (MACD) line is above the signal line, with both lines above zero, while the shrinking histogram suggests the upside momentum is fading. A relative strength index (RSI) of 56 (neutral) is consistent with a consolidating tone, so it is prudent to wait for further strength beyond the $5,090 hurdle before focusing on further gains.
Meanwhile, a further narrowing of the MACD histogram would indicate a pause or range, while a up-to-date positive expansion could revive growth. Moreover, RSI remaining above 50 supports a bullish bias; a shift towards 60 would augment the dynamics and keep the top probes in play. Overall, the technical landscape favors buying shallow failures while momentum resets.
(The technical analysis for this story was written with the facilitate of an AI tool.)
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and exploit in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and protected haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets favor the precious metal.
The price may vary due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Despite this, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A robust dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
