Gold is experiencing a moderate increase, but struggles to surpass the $5,000 level. Support for gold arises from expectations of Federal Reserve rate cuts. The XAU/USD may be forming a pattern targeting $5,340.
The US Dollar’s weakness is benefiting gold, which remains above $4,960. Recent US employment data indicate potential downsides for the labour market, increasing the possibility of Federal Reserve rate cuts.
Technical Analysis
A 4-hour chart reveals XAU/USD’s upward trend, bolstered by a 100-period SMA around $4,950. Positive indicators suggest the development of a Gartley pattern, aiming for the $5,340 area. A drop below $4,655 could alter this outlook, potentially leading to February’s low of $4,400.
Gold is valued for its historical significance as a store of value and is seen as a safe-haven during turbulent times. It serves as a hedge against inflation and currency depreciation. Central banks hold the most gold, adding 1,136 tonnes in 2022. Gold’s price is affected by factors like geopolitical stability, interest rates, and the US Dollar’s strength.
Gold tends to have an inverse correlation with the US Dollar and US Treasuries, and movement in the stock market often affects gold prices inversely.
With gold holding firm above $4,960, we are seeing a clear bullish trend underpinned by expectations of Federal Reserve rate cuts. The price is currently hesitating around the significant $5,000 mark, suggesting a period of consolidation before a potential next move. This presents an opportunity for traders to position for the anticipated C-D leg of the harmonic pattern.
Market Environment
The case for lower interest rates was strengthened by last week’s employment data, which confirmed the slowing labor market trend we observed in the final quarter of 2025. The recent January jobs report showed a significant miss against expectations, fueling speculation that the Fed may act sooner rather than later to support the economy. This has contributed to a weaker US Dollar, which continues to provide a tailwind for the metal.
This market environment suggests considering bullish derivative strategies that capitalize on the expected upward move toward the $5,340 target. Buying call options with strike prices above $5,100 could offer a leveraged play on this forecast. To manage costs, we could structure this as a bull call spread by simultaneously selling a higher-strike call, perhaps around the $5,340 resistance level.
Fundamentally, the high price is also supported by strong institutional demand that carried over from last year. Central banks continued their aggressive purchasing throughout 2025, with final numbers showing they added over 1,000 tonnes for the third consecutive year. This sustained buying provides a strong underlying bid for gold, limiting the potential for sharp sell-offs.
However, we must remain aware of the key technical levels that would invalidate this bullish view. A break below the 100-period simple moving average around $4,950 would be a warning sign. A confirmed move below Friday’s low of $4,655 would signal a major trend reversal and could be a trigger to hedge long positions with put options.
