Key Points
- Spot gold fell 3.9% to $5,183.21, after hitting a record $5,594.82
- Prices are still up over 20% in January, marking the strongest monthly gain since January 1980
Gold prices slid sharply on Friday, retreating more than 4% at one point as rumours circulated that the next Federal Reserve chair could take a more hawkish stance. The pullback followed an aggressive rally that had pushed bullion to fresh record highs just a day earlier.
Spot gold was down 3.9% at $5,183.21 per ounce by 0323 GMT, after falling as much as 5% during the session. On Thursday, prices surged to an all-time high of $5,594.82, underscoring how stretched positioning had become after weeks of heavy inflows.
Despite the sharp decline, gold remains on track for its strongest monthly performance in decades.
Prices have risen more than 20% so far in January, heading for a sixth consecutive monthly gain and the largest monthly advance since January 1980.
A cautious forecast suggests that while short-term volatility may persist, the broader uptrend has not yet been invalidated.
Dollar Rebound and Fed Talk Trigger Profit-Taking
The immediate catalyst for the selloff came from renewed focus on US monetary policy leadership.
President Donald Trump said on Thursday that he intends to announce his pick to replace Fed Chair Jerome Powell on Friday, intensifying speculation around who will lead the central bank when Powell’s term ends in May.
Market chatter that Kevin Warsh could be nominated weighed on gold during Asian trading hours.
Traders interpreted the possibility of a less dovish Fed chair as a risk to bullion, particularly after the metal entered overbought territory following its recent surge.
The pullback also coincided with a rebound in the US dollar from multi-year lows. A stronger dollar tends to pressure gold by making it more expensive for overseas buyers, adding to the incentive for short-term profit-taking.
US gold futures for February delivery fell 2.7% to $5,176.40 per ounce, reflecting the broader shift in near-term sentiment.
Rate Expectations Still Support Longer-Term Demand
Even as the dollar stabilised, the broader macro backdrop remains supportive for gold. Markets continue to price in two interest rate cuts in 2026, suggesting that policy is still expected to ease over the medium term.
The Federal Reserve’s decision earlier this week to leave interest rates unchanged helped underpin the dollar, but it did little to dismantle the longer-term case for gold as a hedge against policy uncertainty and economic strain.
Geopolitical risks also remain unresolved, keeping underlying demand intact even as speculative positions adjust.
Technical Analysis
Gold (XAUUSD) came under sharp pressure, tumbling 2.82% to 5226.38, with a steep intraday fall of 151.57 points. After failing to sustain above the 5246.33 high, a wave of aggressive selling broke below successive moving averages, culminating in a session low of 5150.93.
This sharp drawdown appears to have exhausted selling momentum in the short term, triggering a solid rebound back above the MA5 (5225.81) and MA10 (5222.64).
Despite the selloff, the recovery from the lows has been orderly, supported by steady volume (VOL: 42.00) and a return above the MA20 (5218.80) and MA30 (5207.67).
However, upside remains capped below the earlier high, and the price is approaching a confluence of short-term resistance.
If bulls manage to consolidate above 5226, a retest of the 5246 zone is possible. Failure to hold this region may renew downward pressure, especially if the broader risk sentiment remains cautious.
Short-Term Outlook
Gold’s sharp pullback reflects how sensitive the market has become to shifts in Fed expectations after an exceptional rally.
Hawkish speculation and a firmer dollar have prompted traders to lock in gains, but the metal’s broader monthly performance highlights persistent demand for safe-haven assets.
Near-term price action is likely to remain volatile as markets digest the Fed chair announcement and reassess dollar direction. While further downside cannot be ruled out after such a steep run, the structural drivers behind gold’s surge have yet to fully fade.
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