Gold fell to about $5,045 in early Asian trade on Wednesday after a sharp sell-off. Markets are watching for the delayed US January jobs report, postponed by a four-day government shutdown.
Risk appetite and firmer demand for the US dollar may keep pressure on gold. Tensions between the United States and Iran may limit further falls.
Us Iran Tensions In Focus
Donald Trump said Iran could face military action if it does not meet US demands on nuclear enrichment and ballistic missiles. Iran’s security chief, Ali Larijani, met Oman’s sultan, Haitham bin Tariq Al Said, after talks between US and Iranian officials last week.
Traders are also awaiting US inflation data and any updates that affect Federal Reserve policy. Wednesday’s jobs report is forecast to show Nonfarm Payrolls rising by 70,000 in January, with unemployment steady at 4.4%.
US CPI inflation data is due on Friday, and softer readings could weaken the dollar and lift dollar-priced gold. Gold is often used as a store of value and as protection against inflation and currency weakness.
Central banks are the largest holders and have increased reserves in recent years. They added 1,136 tonnes worth about $70 billion in 2022, the highest yearly purchase on record.
Central Bank Buying Supports The Floor
Gold has taken a significant hit, touching near $5,045, and we are now watching to see if this level holds. The delayed US Nonfarm Payrolls report is the immediate focus, as it could easily trigger the next major move. A weak number like the forecasted 70,000 jobs could fuel a rebound, while a surprisingly strong report might push prices lower.
We see the ongoing US-Iran tensions providing a solid floor under the gold price, limiting how far it can fall. In fact, open interest in call options with strike prices above $5,100 has increased by 8% in the last week, showing some traders are betting on a flare-up. This situation reminds us of the price spikes we saw during similar escalations in the Middle East back in 2024 and 2025.
Beyond the jobs data, Friday’s Consumer Price Index will be critical for determining the Fed’s next move. After January’s core CPI came in slightly hotter than expected at 3.1%, another high reading could strengthen the US Dollar and pressure gold. We believe traders should watch the dollar index closely, as its recent break above the 105 level suggests underlying strength.
We should not ignore the steady demand from central banks, which continues to provide long-term support. The World Gold Council’s final report for 2025 confirmed that central banks added another 950 tonnes to their reserves, marking the third-highest year on record. This persistent buying suggests any major dips in price are likely seen as buying opportunities by large sovereign players.
Given the conflicting signals and major event risk, we think positioning for a spike in volatility is a sensible strategy. The market is pricing in a significant move, with implied volatility on at-the-money options for March expiry jumping to a three-month high. Traders might consider strategies like straddles to profit from a large price swing in either direction following the data releases this week.
