Gold climbs to $5,050 as Fed-driven USD weakness offsets positive risk tone ahead of US NFP

• Gold regains positive traction and recovers a part of the previous day’s modest losses.

• The Fed-inspired US Dollar weakness continues to act as a tailwind for the commodity.

• The bullish sentiment might cap the precious metal as traders await the US NFP report.

Gold (XAU/USD) attracts some dip-buyers following the previous day's modest slide and climbs back above the $5,050 level during the Asian session on Wednesday. Prospects for lower US interest rates keep the US Dollar (USD) depressed near its lowest level in over a week and act as a tailwind for the non-yielding yellow metal. However, the underlying bullish sentiment might cap the upside for the safe-haven commodity. Traders might also opt to wait for the release of the US Nonfarm Payrolls (NFP) report before placing fresh directional bets.

The US Census Bureau reported on Tuesday that Retail Sales remained unchanged in December. The print followed the 0.6% increase recorded in November and came in weaker than the market expectation for an increase of 0.4%. This comes on top of signs of weakness in the US labor market and prompted economists to downgrade their economic growth estimates for the fourth quarter, bolstering bets for more rate cuts by the US Federal Reserve (Fed). In fact, money markets are pricing in 58 basis points (bps) of Fed easing in 2026, which continues to undermine the Greenback.

Meanwhile, concerns about the Fed's independence resurfaced after US President Donald Trump said on Saturday that he might sue his newly selected Fed chair nominee, Kevin Warsh, if he didn’t lower interest rates. Furthermore, Fed Governor Stephan Miran noted that 100% central bank independence is impossible. This overshadowed hawkish comments from a duo of regional Fed Presidents – Lorie Logan and Beth Hammack – and failed to provide any respite for the USD bulls. This, in turn, suggests that the path of least resistance for the Gold remains to the upside.

Dallas Fed President Lorie Logan said that the labor market is stabilizing, with downside risks dissipating, while inflation has been above the 2% target for nearly five years. Logan further noted that the current policy stance may be very close to neutral, providing little restraint. Separately, Cleveland Fed President Beth Hammack said that the current Fed target rate is in the vicinity of neutral and the central bank is in a good position with policy to see how things play out. Fed rate policy could be on hold 'for quite some time' as inflation is still too high and tariff issues remain in play, Hammack added.

The XAU/USD bulls, however, seem reluctant to place aggressive bets and might opt to wait for the US monthly employment details for more clues about the Fed's policy outlook. This, in turn, will play a key role in influencing the near-term USD price dynamics and providing some meaningful impetus to the commodity. In the meantime, the underlying bullish sentiment, along with signs of easing tensions in the Middle East, might keep a lid on the safe-haven Gold. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further upside.

Gold needs to surpass the $5,090 resistance zone to back the case for additional gains

From a technical perspective, the XAU/USD pair showed some resilience below the 200-period Simple Moving Average (SMA) on the 4-hour chart earlier this month. The said SMA rises steadily and sits well below the price, reinforcing an underlying bullish bias. A sustained hold above this average would keep the path tilted higher.

However, the Moving Average Convergence Divergence (MACD) line stands above the Signal line, with both above zero, while a contracting histogram suggests fading upside momentum. The Relative Strength Index (RSI) at 56 (neutral) aligns with a consolidative tone, making it prudent to wait for some follow-through strength beyond the $5,090 hurdle before positioning for further gains.

Meanwhile, a further narrowing of the MACD histogram would point to a pause or range, whereas a fresh positive expansion could revive the advance. Moreover, the RSI hovering above 50 supports the bullish bias; a push toward 60 would enhance momentum and keep topside probes in play. Overall, the technical backdrop favors buying shallow setbacks while momentum resets.

(The technical analysis of this story was written with the help of an AI tool.)