Gold Begins to Recover, But Plenty of Brakes Remain
Gold (XAU/USD) began attracting buyers on Tuesday after a sharp two-day fall that briefly touched the $4,400 area—its lowest level since January 6. This recovery was aided by a slight weakening of the US dollar, moving away from its more than one-week peak reached on Monday.
However, the dollar's strength is likely to persist. Donald Trump's appointment of Kevin Warsh as the next Federal Reserve Chair—coupled with solid US manufacturing data—is seen as encouraging the Fed to remain cautious about lowering interest rates. This combination tends to act as a drag on gold's momentum.
On the sentiment side, the market is also beginning to enter a calmer mode. Signs of a US-Iran de-escalation and news of a US-India trade deal have improved risk appetite, reducing the demand for safe-haven assets like gold. This means there is room for gold to rise, but it could quickly bottom out if the market perceives global risks to ease.
Another pressure comes from margin policy. CME Group raised margin requirements for precious metals futures contracts, triggering two consecutive days of liquidations. As a result, gold was briefly dragged lower, and the market is now tending to be more selective about adding new positions.
Data-wise, the Institute for Supply Management reported that US factory activity has resumed expansion: the manufacturing PMI rose to 52.6 from 47.9. This figure reinforces the narrative that the US economy is not yet "cooling off," which typically leads to expectations of less aggressive monetary easing—again a limiting factor for gold.
Looking ahead, market participants will be monitoring the JOLTS (job openings) release on Tuesday, followed by ADP data and the ISM services PMI on Wednesday, plus comments from Fed officials. If the dollar strengthens again, gold could become a burden; but if the dollar weakens and volatility subsides, gold's recovery is likely to continue—although the market still needs strong buying evidence to conclude that the correction phase is truly over. (asd)
Source: Newsmaker.id
