Gold Under Pressure from Risk-On, But Weak Dollar Acts as a Brake
Gold (XAU/USD) pared intraday losses and traded with a slight loss heading into the European session, holding below $5,050 and attempting to defend the psychological $5,000 area. Pressure stemmed from risk-on sentiment after Japan's snap election results eased political uncertainty, coupled with signs of easing Middle East tensions as the US-Iran diplomatic path remains intact. This has dampened interest in safe-haven assets, making it difficult for gold to continue its two-day rally.
However, gold's decline was curbed by a weakening US dollar driven by market expectations that the Fed will deliver at least two 25 bps interest rate cuts in 2026, which benefits non-yielding assets like gold. Dollar sentiment was also pressured by concerns about the Fed's independence, after Trump stated he could sue his preferred Fed chairman candidate, Kevin Warsh, if he fails to cut interest rates, and there was talk of an investigation if a rate cut is not implemented. On the other hand, the market tends to hold large positions while awaiting this week's key US data—Retail Sales (Tuesday), Non-farm Payrolls (Wednesday), and CPI (Friday)—which have the potential to determine the direction of the dollar and gold.
Among additional fundamental factors, support also comes from official demand: the People's Bank of China (PBOC) reportedly continued its gold purchases for the 15th consecutive month in January. Furthermore, there are reports that Chinese regulators are encouraging financial institutions to reduce the concentration of US Treasury holdings, which could maintain gold's appeal as a diversifier amid bond market volatility. (asd)
Source: Newsmaker.id
