Gold Is in the Red, But Why Isn't It Falling? Here's Why
Gold prices (XAU/USD) fell sharply in the Asian session on Friday, then pared some of their losses to settle in the $5,100s. Despite a small rebound, gold remains in the red zone as market participants are becoming cautious after an already overly strong rally.
The initial trigger for pressure came from news of a Senate agreement to prevent a US government shutdown. This news calmed the market, pushing the dollar slightly higher, which typically puts pressure on gold.
Besides the dollar factor, there was also an element of profit-taking. Gold has risen rapidly (more than 25% since the start of the month) and repeatedly set records, so it's natural for profit-taking to occur when a catalyst that eases risk-off is present.
However, gold's decline is also unlikely to penetrate deeply, as there is still a "cushion" of risks that have not yet dissipated: concerns about the Fed's independence, expectations of lower interest rates in the future, plus the threat of tariffs and geopolitical uncertainty.
In terms of headlines, Trump has added to the volatility: he's renewing pressure on the Fed to lower interest rates and has said he will announce Powell's replacement Friday morning—which is making the market sensitive because it could change policy expectations.
Global tensions also remain a factor holding back corrections: the US continues to deploy military assets in the Middle East, while the Russia-Ukraine issue has yet to show any signs of progress. These conditions typically lead some investors to hold onto gold as "insurance."
The next market focus will be on the US PPI release, comments from FOMC officials, and the announcement of the new Fed chair. This combination could determine whether the dollar continues to strengthen (under pressure on gold) or remains stagnant (with room for gold to stabilize/rise again).
5 Key Points
- The shutdown deal has caused the dollar to strengthen slightly → gold is under pressure.
- Gold corrected due to profit-taking after a parabolic rally.
- Risks regarding the Fed's independence, tariffs, and geopolitics continue to cushion gold.
- The market awaits the announcement of Powell's replacement → potential for high volatility.
- PPI data and FOMC comments will be the triggers for the next dollar and gold direction. (asd)
Source: Newsmaker.id
