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Gold prices fell to a three-week low below $4,550 during the early European trading session, pressured by profit-taking activity. The precious metal extended its decline after hitting a record high last week, amid signs of improving political stability in the United States following the selection of Kevin Warsh as the next Federal Reserve Chair, which eased concerns over the central bank’s independence.
XAU/USD Technical Overview
Gold is trading in negative territory today. However, from a longer-term perspective, the most likely path remains to the upside, as the yellow metal continues to find solid support above the key 100-day Exponential Moving Average (EMA) on the daily chart. Bollinger Bands are widening, signaling the continuation of a strong trend.
Despite the broader bullish bias, the 14-day Relative Strength Index (RSI) is hovering around the midline, suggesting that further consolidation or a temporary pullback cannot be ruled out.
A green candlestick formation and sustained trading above the February 2 high at $4,885 could pave the way for another leg higher toward the psychological $5,000 level. The next upside resistance to watch is the January 27 high at $5,182.
On the downside, the first support is seen at the January 19 low of $4,620. A decisive break below this level could expose the January 12 low at $4,513. A key support zone is located at the 100-day EMA near $4,275.
Fundamental Overview
Ongoing geopolitical tensions, including strained U.S.–Iran relations, may continue to support traditional safe-haven assets such as gold. Traders will closely monitor developments surrounding U.S.–Iran negotiations, along with further clarity on Kevin Warsh’s policy stance. Additionally, rising demand from major central banks could contribute to further upside in the precious metal.
The U.S. ISM Manufacturing Purchasing Managers’ Index (PMI) is scheduled for release later on Monday. The index is expected to improve to 48.3 in January from 47.9 in December. A downside surprise could weaken the U.S. Dollar (USD) and lift USD-denominated commodities, as a softer greenback makes gold more attractive to foreign buyers.
Daily Market Movers: Gold Remains Under Selling Pressure After Historic Pullback
Over the weekend, U.S. President Donald Trump said the United States “hopefully” would reach an agreement with Iran. Meanwhile, Iran’s Supreme Leader Ayatollah Ali Khamenei warned that any attack on the country would trigger a broader regional conflict, as the U.S. continues to build up its military presence nearby.
“Investors and global central banks have increasingly chosen gold as their reserve currency of choice, believing it offers protection from U.S. policy dependency,” said Emma Wall, Head of Investment Strategy at Hargreaves Lansdown. “Some countries are watching Russia’s experience with U.S. dollar assets being seized by global players backing Ukraine and are considering gold as a more attractive neutral reserve,” she added.
President Trump has nominated Kevin Warsh to replace Jerome Powell as the next Fed Chair, with Warsh expected to assume office in May 2026.
U.S. Producer Price Index (PPI) inflation rose 3.0% year-over-year in December, exceeding estimates of 2.7%, according to the Bureau of Labor Statistics on Friday. On a monthly basis, PPI increased 0.5%, beating both market expectations and the previous reading of 0.2%.
Higher-than-expected producer inflation could further strengthen the case for the Federal Reserve to keep interest rates unchanged while assessing inflation trends.
Markets are currently pricing in nearly an 87% probability that interest rates will remain within the 3.50%–3.75% range, with the first 25-basis-point rate cut likely to occur in June.