Gold fell 0.72% to $5,022 on Tuesday, staying above $5,000 as the US Dollar steadied and traders reduced short positions. The US Dollar Index (DXY) was flat at 96.78, while the 10-year Treasury yield fell five basis points to 4.149%.
US Retail Sales data were weak, with December sales unchanged at 0% month-on-month versus 0.6% in November and forecasts for a 0.4% rise. The retail control group fell -0.1% in December after 0.2% previously, and November was revised down.
Fed Cut Expectations Shift
Labour cost data also softened, with the Employment Cost Index rising 0.7% in Q4 after 0.8% in Q3. Markets increased expected Federal Reserve rate cuts in 2026 from 56.5 basis points to 58.5 basis points.
Attention is on the Nonfarm Payrolls report due Wednesday, 11 February, with forecasts of 70K jobs in January versus 50K in December. The unemployment rate is expected to hold at 4.4%, and Kevin Hassett said jobs numbers could be “slightly lower”.
Gold traded in a $5,000–$5,100 range, with resistance at $5,100 then $5,200, $5,451 and near $5,600. Support levels include $5,000, the 20-day SMA at $4,910, then $4,800 and $4,402.
The recent dip in gold, despite soft economic signals, shows us the market is hesitant ahead of major news. We are seeing traders hold back on big moves until we get the January Nonfarm Payrolls report tomorrow. This pause suggests that positioning for a breakout, rather than chasing the current price, is the smarter play.
Options Market Range Strategies
Implied volatility is building, as options markets are pricing in a sharp move following the jobs number. This makes buying options costly, so we are looking at strategies that benefit from the price staying within a range, like selling strangles outside the $4,900-$5,150 zone. A muted reaction to the data would make these positions profitable.
A jobs number coming in significantly above the 70K forecast would challenge the growing consensus for deep Fed rate cuts. This could trigger a sharp rally in the US Dollar and push gold down to test its 20-day moving average near $4,910. We saw a similar pattern in the third quarter of 2025 when a robust jobs report briefly delayed rate cut expectations.
On the other hand, a miss on the payrolls figure would confirm the recent weak retail sales and labor cost data, likely accelerating bets on Fed easing. This could be the catalyst that breaks gold out of its current range, pushing it above the $5,100 resistance level. The path toward the January peak of $5,451 would then look much clearer.
Regardless of tomorrow’s data, we must remember the bigger trend of central bank buying provides a strong floor for the price. Official data for 2025 showed central banks added a net 1,037 tonnes to their reserves, marking the second-highest year on record for physical demand. This underlying bid, especially from Asian central banks, should limit the severity of any potential sell-off.
