Gold (XAU/USD) recovers further from its lowest level since January 6, touched the previous day, and retakes the $4,900 mark during the early European session on Tuesday. The US Dollar (USD) edges lower and moves away from an over one-week high, touched on Monday, and assists the commodity to regain positive traction following a steep decline over the past two days. That said, US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) chair, along with upbeat US ISM Manufacturing PMI released on Monday, could limit deeper USD losses.
Furthermore, signs of de-escalation of US-Iran tensions over the latter’s nuclear program, along with the US-India trade deal, remain supportive of a positive risk tone, which could cap the safe-haven Gold. Apart from this, the CME Group’s decision to raise margin requirements on precious metals futures might turn out to be another bearish development for the precious metal. Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent sharp corrective slide from the $5,600 mark, or the record high touched last week, has run its course.
Daily Digest Market Movers: Gold bulls retain intraday control amid softer USD
- US President Donald Trump on Friday nominated Kevin Warsh to succeed Jerome Powell as the next Federal Reserve Chair in May, pending Senate approval. Warsh’s background as a hawk suggests that he would remain vigilant if inflation expectations begin to rise.
- Adding to this, the CME Group said over the weekend that it would increase margins on precious metals futures starting from the close of markets on Monday. This prompted liquidation for the second straight day and dragged the Gold to a four-week low on Monday.
- On the economic data front, the Institute for Supply Management reported on Monday that the US factory activity grew for the first time in a year. In fact, the Manufacturing PMI rose to 52.6 in January, marking a significant recovery from 47.9 in the previous month.
- Meanwhile, Trump announced on Monday that the US and India have reached a trade deal and will immediately move to lower tariffs on each other’s goods. Moreover, Iran and the US are expected to resume nuclear talks on Friday, further boosting investors’ confidence.
- The US Dollar ticks lower on Tuesday and moves away from an over one-week high, touched the previous day, lending some support to the Gold during the Asian session. The aforementioned negative factors, however, might keep a lid on further gains for the bullion.
- The release of the Job Openings and Labor Turnover Survey (JOLTS) for December 2025 and the Nonfarm Payrolls (NFP) report will be delayed due to a partial US government shutdown. Hence, the USD price dynamics would continue to influence the XAU/USD pair.
Gold is likely to confront stiff resistance near $5,000
The commodity showed resilience below the 50-day Simple Moving Average (SMA) and bounced off the 50% retracement level of the July 2025-January 2026 rally on Monday. The upward slope of the SMA suggests dips could be supported. Adding to this, the XAU/USD pair currently holds above the 38.2% Fibonacci retracement level, pegged around the $4,645-4,650 area, and should offer nearby support. Moreover, the Relative Strength Index (RSI) sits at 51.91 and edges higher, hinting at stabilizing momentum.
However, the Moving Average Convergence Divergence (MACD) line stands below the Signal line and below zero, reinforcing a bearish tone. The negative histogram widens, pointing to intensifying downward momentum. Meanwhile, any further move up could refocus the 23.6% retracement at $4,995.94, while failure to hold the first support would leave the recovery vulnerable to further consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
