Gold (XAU/USD) fell to about $5,030 in Asian trading on Tuesday, sliding below $5,050 after two days of gains. The move came as traders shifted towards equities on improved risk mood, while waiting for key US data later this week, including the delayed January US employment report.
US shares rose on Monday, with the S&P 500 lifted by technology stocks and the Dow Jones Industrial Average reaching a record. Lower concern about US-Iran conflict also reduced demand for gold.
US Iran Tension Eases
The US and Iran agreed to continue indirect talks after what were described as positive discussions. Iran’s President Masoud Pezeshkian called the Friday nuclear talks “a step forward”.
China’s central bank kept adding to reserves for a 15th straight month in January. The People’s Bank of China reported gold holdings of 74.19 million fine troy ounces at end-January, up from 74.15 million a month earlier.
In the US, Treasury Secretary Scott Bessent did not rule out a criminal investigation of Kevin Warsh, Donald Trump’s nominee for Fed chair, if Warsh refuses to cut interest rates. This added to concern about Fed independence, which weighed on the US dollar and offered some support to dollar-priced gold.
Around this time last year, we saw gold dip below $5,050 an ounce as traders rotated into equities amid a classic “risk-on” phase. This dynamic feels familiar, as the S&P 500 has continued its rally, posting a 5.4% gain in January 2026, its best start to the year since 2019. This persistent strength in stocks may continue to pull capital away from gold in the short term.
Central Bank Gold Purchases
A key factor that limited gold’s downside in early 2025 was the consistent buying from the People’s Bank of China. This trend has not stopped; in fact, it has accelerated with central banks globally adding a near-record 1,037 tonnes to their reserves in the last reporting year of 2025. This strong institutional demand provides a solid floor, suggesting any significant dips in price will likely be viewed as buying opportunities by official-sector participants.
Unlike last year, when concerns over the Fed’s independence weakened the dollar, the current environment is quite different. The latest US Consumer Price Index report showed inflation holding firmer than expected at 3.1%, tempering market expectations for imminent and aggressive interest rate cuts. This has kept the US Dollar Index (DXY) firm above 104, creating a notable headwind for gold prices.
For derivatives traders, this presents a mixed but clear picture for the coming weeks. The strong equity market suggests buying put options on gold futures to hedge against a further risk-on driven price drop. Conversely, the strong central bank support means selling out-of-the-money puts could be an effective strategy to collect premium, banking on the idea that prices will not collapse through established support levels.
