Gold fell to about $4,860 in early Asian trading on Wednesday, during thin holiday conditions with much of Asia closed for the Lunar New Year. Traders are watching the Federal Open Market Committee (FOMC) Minutes due later on Wednesday.
Market liquidity stayed low because of regional holidays. The market focus includes whether any renewed moves in the US dollar could affect gold demand.
Us Iran Tensions Ease
Easing tensions between the US and Iran also weighed on gold, which is often bought during periods of uncertainty. Iran’s Foreign Minister Abbas Araqchi said on Tuesday that both sides had agreed on main “guiding principles” in nuclear talks, while noting a deal is not imminent.
The FOMC Minutes may offer clues on the future path of US interest rates. A more dovish tone could weaken the US dollar and support prices for dollar-priced commodities.
Gold is commonly used as a store of value and is widely used in jewellery. It is also often treated as a safe-haven asset and as a hedge against inflation and weaker currencies.
Central banks are the largest holders of gold and added 1,136 tonnes worth around $70 billion in 2022, the highest annual purchase on record. Gold often moves inversely to the US dollar and US Treasuries, and can also move against risk assets such as equities.
Market Focus Today
With gold currently trading around $4,860, the immediate focus is on the Federal Open Market Committee (FOMC) minutes being released later today. Trading is thin due to the Lunar New Year holiday, which can lead to exaggerated price movements on any surprising news. We are watching for any hints about the future path of interest rates, as this will be the primary driver this week.
The market is pricing in a more dovish stance from the Fed, especially after January’s CPI data came in slightly cooler than expected at 2.8%. If the minutes confirm that policymakers are leaning towards rate cuts later in 2026, we could see the US Dollar weaken, providing a strong tailwind for gold. Traders might consider buying call options to position for a potential breakout above recent highs.
Despite this, we see a solid floor of support for gold prices, limiting the appeal of outright short positions. Central bank buying remained a powerful force through the end of 2025, with the World Gold Council reporting another quarter of robust purchases, particularly from emerging market banks. This persistent demand suggests that any significant dips are likely to be bought quickly.
Geopolitical factors also remain supportive, even as tensions between the US and Iran show signs of easing. We are now monitoring growing political uncertainty ahead of key European elections and renewed frictions in the South China Sea. These issues keep gold’s safe-haven appeal intact, making it a valuable hedge in a diversified portfolio.
From a derivatives perspective, the current environment is interesting. The CBOE Gold Volatility Index (GVZ) has ticked up to 17.5, showing nervousness ahead of the Fed’s announcement. Traders who anticipate a large price swing but are uncertain of the direction could look at straddle or strangle options strategies to capitalize on this expected volatility.
Looking back, we remember how the aggressive rate hikes of 2023 and 2024 initially capped gold’s potential by strengthening the dollar. Now, in early 2026, we are in the opposite scenario where the discussion has shifted entirely to the timing and pace of easing. This fundamental change in monetary policy underpins the bullish outlook for the precious metal in the coming months.
