Gold recovers swiftly from weekly low, climbs back closer to $5,000 ahead of US CPI
- Gold attracts fresh buyers following the previous day’s downfall to the weekly low.
- Dovish Fed bets act as a headwind for the USD and underpin the precious metal.
- Traders now look to the latest US consumer inflation figures for a fresh impetus.
Gold (XAU/USD) regains positive traction during the Asian session on Friday and recovers a part of the previous day's heavy losses to the $4,878-4,877 region, or the weekly low. The commodity has now moved back closer to the $5,000 psychological mark as traders keenly await the release of the US consumer inflation figures for more cues about the Federal Reserve's (Fed) policy path. The outlook will, in turn, play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding bullion.
In the meantime, the upbeat US Nonfarm Payrolls (NFP) report released on Wednesday forced investors to scale back their bets for a Fed rate cut in March. This keeps the USD Index (DXY), which tracks the Greenback against a basket of currencies, afloat above a two-week low, which, in turn, triggered the overnight decline in Gold prices. That said, traders are still pricing in the possibility that the US central bank will lower borrowing costs two more times in 2026. Furthermore, Thursday's unimpressive US Jobless Claims data caps the USD.
The US Department of Labor (DOL) reported that the number of US citizens submitting new applications for unemployment insurance fell to 227K during the week ending February 7. This was higher than 222K estimated, but lower than the previous week’s revised 232K print. Moreover, Continuing Claims rose to 1.862 million during the week ending January 31, highlighting the underlying weakness in the labor market that has been prevalent over the past year. This, in turn, acts as a tailwind for the USD and revives demand for the Gold.
Furthermore, a turnaround in the global risk sentiment – as depicted by a generally weaker tone around the equity markets – turns out to be another factor driving flows toward safe-haven Gold. It remains to be seen, however, if the XAU/USD pair can build on the momentum or if bulls opt to wait for the crucial US Consumer Price Index (CPI) report before placing fresh bets.
XAU/USD 1-hour chart
Gold’s mixed technical setup warrants caution for aggressive traders
The overnight breakdown through the weekly trading range could be seen as a key trigger for the XAU/USD bears. The lack of follow-through selling and resilience below the $4,900 mark warrants some caution. The Moving Average Convergence Divergence (MACD) turns higher through the Signal line near the zero level, and the histogram flips positive, suggesting a transition to improving bullish momentum.
Moreover, the Relative Strength Index (RSI) stands at 44.72 (neutral) after rebounding from oversold territory, supporting a tentative recovery in intraday tone. With the RSI still below 50, rallies could be capped, whereas a MACD slip back beneath the Signal line and zero would reassert bearish pressure and extend consolidation. Nevertheless, the momentum remains supported while the MACD holds above zero and the positive histogram widens, though a contracting histogram would hint at fading impetus.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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