Gold drifts lower as positive risk tone tempers safe-haven demand; downside seems limited

• Gold struggles to build on its gains registered over the past two days amid mixed fundamental cues.
• The risk-on mood undermines the safe-haven precious metal, though dovish Fed bets lend support.
• Concerns about the Fed’s independence further undermine the USD and favor the XAU/USD bulls.

Gold (XAU/USD) drifts lower during the Asian session on Tuesday and snaps a two-day winning streak, though it lacks strong follow-through selling and shows some resilience below the $5,000 psychological mark amid mixed cues. The outcome of Japan's snap election on Sunday removes political uncertainty, which, along with signs of easing tensions in the Middle East, remains supportive of the upbeat market mood. This turns out to be a key factor exerting downward pressure on the safe-haven precious metal.

Meanwhile, investors expect the US Federal Reserve (Fed) to deliver at least two 25-basis-point rate cuts in 2026. This, along with concerns about the US central bank's independence, keeps the US Dollar (USD) depressed near its lowest level in more than one week and acts as a tailwind for the non-yielding Gold. Traders also seem reluctant to place aggressive directional bets ahead of Wednesday's release of the crucial US Nonfarm Payrolls (NFP) report and the latest US consumer inflation figures on Friday.

Daily Digest Market Movers: Gold drifts lower as receding safe-haven demand counters Fed rate cut bets, bearish USD

• Indirect talks between the US and Iran on the future of the latter's nuclear program ended on Friday with a broad agreement to maintain a diplomatic path. This eases concerns about a military confrontation in the Middle East, boosting investors' confidence. This remains supportive of the upbeat market mood and drives flows away from the safe-haven Gold during the Asian session on Tuesday.
• Talks between the US and Iran on the future of the latter's nuclear program ended on Friday with a broad agreement to maintain a diplomatic path. Iran's Foreign Minister, Abbas Araghchi, described the eight hours of meetings as a good start conducted in a good atmosphere. US President Donald Trump described the talks as very good and said that another meeting would be held early this week.
• Meanwhile, concerns about the US Federal Reserve's independence resurfaced after Trump said on Saturday that he might sue his newly selected Fed chair nominee, Kevin Warsh, if he didn’t lower interest rates. Moreover, US Treasury Secretary Scott Bessent last Thursday refused to rule out the possibility of a criminal investigation of Kevin Warsh if he ends up refusing to cut interest rates.
• This comes amid the growing acceptance that the US central bank will lower borrowing costs two more times this year, with the first rate cut expected in June, and drags the US Dollar to over a one-week low. This, in turn, acts as a tailwind for the non-yielding yellow metal and limits losses. Traders now look to this week's important US macro releases for more cues about the Fed's rate-cut path.
• A rather busy week kicks off with the release of the US monthly Retail Sales data, due later during the North American session this Tuesday. The focus, however, remains on the closely-watched US jobs report – popularly known as the Nonfarm Payrolls report – on Wednesday and the US consumer inflation figures on Friday. These data releases will drive the USD and provide a fresh impetus to the XAU/USD pair.
• The People's Bank of China reported on Saturday that the central bank continued its gold purchases for the 15th straight month in January, highlighting steady demand amid fiscal concerns in major economies. Moreover, reports suggest that Chinese regulators have advised financial institutions to curb holdings of US Treasuries due to concern over concentration risk and market volatility.

Gold needs to surpass last week’s swing high to back the case for any further move up

The overnight failure near last week's swing low warrants some caution before placing fresh bullish bets around the precious metal. The Moving Average Convergence Divergence (MACD) histogram stays positive but contracts, suggesting fading momentum as the MACD line holds above the signal line and above zero. The RSI at 55 (neutral) reflects balanced conditions with a mild upside tilt.

Meanwhile, the rising trend line from $4,397.52 underpins the bullish bias, offering support near $4,819.19. Should the Gold price defend the ascending support, bulls could extend the recovery, while a close beneath it would challenge the uptrend and open room for a deeper pullback toward $4,397.52.

A re-widening positive MACD histogram would strengthen buying pressure, whereas a drift back toward the zero line would flag waning demand; RSI holding above 50 would keep buyers in control, but a slide toward 45 would tilt bias back to range.

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