Key Points:
- Gold comes under selling pressure during Monday’s early European session.
- News of Kevin Warsh’s potential nomination as the next Fed chair weighs on gold.
- Geopolitical tensions and ongoing central bank purchases could limit losses for XAUUSD.
Gold prices (XAUUSD) fell to a three-week low below $4,500 on Monday, weighed down by profit-taking.
The precious metal extended its decline after hitting record highs last week, as signs of political stability in the United States emerged following Kevin Warsh’s selection as the next Federal Reserve chair, easing concerns over the central bank’s independence.
Meanwhile, persistent geopolitical risks, including tensions between the US and Iran, may continue to support traditional safe-haven assets such as gold. Market participants will be watching developments in US–Iran negotiations closely, alongside further signals on Warsh’s policy stance. In addition, sustained buying from major central banks could help limit the downside and provide support to precious metal.
Technical Analysis
XAUUSD is currently trading around the key psychological level of $4,500. This level is crucial for gold as if it fails to hold, it could extend its losses further. As seen in the price action below, it went to a low point of $4402 on Monday but quickly rejected as this is a strong support level.
However, from the indicators side of view, it is starting to turn very bearish for gold. The moving averages have crossed and formed bearish signals for gold. Price is also trading away from the moving average, which shows bearish momentum is very strong.
MACD indicator is also showing the signal line is starting to cross below 50 level and bearish histogram bars have been printed. It is advisable to wait for further confirmation before taking any trades as current market conditions are very volatile and moves can be unexpected.
Cautious Outlook as US PMI Awaits
The US ISM Manufacturing Purchasing Managers’ Index (PMI) is due to be released later on Monday. The index is forecast to rise to 48.5 in January from 47.9 in December. However, a weaker-than-expected reading could weigh on the US Dollar (USD) and support USD-denominated commodities, as a softer dollar would make gold priced in dollars more appealing to overseas buyers.
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