Gold (XAU/USD) extends its sideways consolidative price move through the Asian session on Thursday and remains below the $5,000 psychological mark as traders seem hesitant amid mixed cues. The US Dollar (USD) preserves its strong gains to over a one-week high in the wake of somewhat hawkish Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting. This, in turn, is seen as a key factor undermining the non-yielding yellow metal.
In fact, the minutes revealed that policymakers remain deeply divided over the necessity and timing of further interest rate cuts. Several Fed officials indicated that more rate cuts could be warranted if inflation declines as expected, while others cautioned that easing too early could compromise the central bank’s 2% inflation target. This followed the upbeat US data, which showed that Industrial Production increased more than anticipated in January and manufacturing output rose by the most in 11 months, backing the case for the Fed to hold interest rates steady.
The outlook, in turn, triggered a sharp rise in the US Treasury bond yields and provided a goodish lift to the USD. That said, markets are still pricing in the possibility of three 25 basis points (bps) Fed rate cuts this year. Apart from this, threats to the Fed’s independence cap the upside for the USD and offers some support to the Gold. This, along with geopolitical tensions, acts as a tailwind for the safe-haven precious metal, warranting caution for aggressive bearish traders and making it prudent to wait for some follow-through selling before positioning for further losses.
The third round of US-mediated negotiations between Ukraine and Russia concluded in Geneva on Wednesday without any major breakthrough. This underscores that substantive disagreements remain over the status of eastern Ukrainian territories occupied by Russian forces. Furthermore, reports suggest that the US military is ready to attack Iran as early as this weekend. Although US President Donald Trump has not made a final decision yet on whether to authorize an armed confrontation, this keeps geopolitical risks in play and could support the safe-haven Gold.
Traders now look to Thursday’s US economic docket – featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Pending Home Sales data. Apart from this, speeches from influential FOMC members will drive the USD and the GBP/USD pair later during the North American session. The focus, however, will remain glued to the US Personal Consumption Expenditure (PCE) Price Index, due on Friday, which should provide cues about the Fed’s rate-cut path. This, in turn, will drive the USD and provide a fresh impetus to the Gold price.
XAU/USD 1-hour chart
Gold looks to build on Wednesday’s breakout through the 100-hour SMA
The commodity now seems to have found acceptance above the 100-hour Simple Moving Average (SMA), though the overnight failure to find acceptance above the $5,000 mark warrants caution for bullish traders. Moreover, the 100-hour SMA slopes downward, underscoring lingering bearish pressure. Moreover, the Moving Average Convergence Divergence (MACD) line has slipped below the Signal line near the zero mark, and the histogram turned negative, suggesting waning upside momentum.
The Relative Strength Index (RSI) prints at 59 (neutral), reflecting balanced conditions after the earlier overbought stretch. The 100-hour SMA at $4,956.71 serves as immediate dynamic support. Despite its decline, the SMA continues to support the intraday structure as long as the XAU/USD pair trades above it. A bullish crossover in the MACD and a sustained move back above zero would improve momentum, and an RSI push through 60 would reinforce follow-through on the upside. Conversely, a close below the SMA would hand the initiative back to sellers and expose the risk of a deeper pullback.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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