Gold prices fell nearly 2% as the US Dollar strengthened during North American trading. XAU/USD dropped to $4,880, a 1.75% decline, amid ongoing liquidation in precious metals.
The European Central Bank and the Bank of England held rates steady, with the latter expected to reduce rates in 2026. The US reported weak labour market data, with jobless claims rising and job openings dropping.
The Impact Of US Dollar Movement
The US Dollar Index increased by 0.11%, negatively impacting Gold and Silver prices. However, US Treasury yields fell as expectations of Federal Reserve easing in 2025 grew, with bond market predictions now hitting 56 basis points.
Gold’s short-term outlook is cautious with recent volatility, though the daily chart indicates an upward trend. Investors are advised to watch the $4,900 resistance level for bullish continuation or a drop below $4,842 for potential declines.
Central banks, major Gold holders, bought 1,136 tonnes of Gold worth $70 billion in 2022, marking the largest annual purchase on record. Gold serves as a hedge against inflation and currency depreciation, often rising when the Dollar weakens or during geopolitical instability.
Gold’s value fluctuates with changes in the US Dollar and interest rates. Strong Dollar valuations typically restrain Gold prices, while weaker Dollar conditions prompt price increases.
A Look Back At The Past Year
Looking back a year ago to early 2025, we saw gold prices slide under pressure from a strong US Dollar, even as the American economy showed signs of weakness. That period of liquidation was a reaction to hawkish Fed comments and profit-taking after a strong run. Today, the context has shifted, but those dynamics are still important for our strategy.
The labor market weakness we saw emerging in January 2025, with rising job cuts and falling openings, turned out to be a leading indicator. This led the Federal Reserve to deliver two interest rate cuts in the second half of 2025, just as the markets began to price in at that time. Those rate cuts helped put a floor under gold prices throughout last year.
Now, recent data shows this trend of economic softening is continuing into 2026. The January Non-Farm Payrolls report released last week came in at just 155,000, well below the 200,000 that was expected. As a result, market pricing, according to the CME FedWatch Tool, now shows a greater than 70% chance of another rate cut at the Fed’s March meeting.
For traders, this reinforces a bullish outlook for gold in the coming weeks. With further Fed easing on the horizon, the US Dollar is likely to face downward pressure, which is typically positive for gold. We should consider long futures positions or buying call options targeting the $5,000 psychological level, a barrier that was tested late last year.
The primary risk to this view is a sudden change in tone from the Federal Reserve. Any unexpectedly hawkish comments could cause the dollar to spike and trigger a sell-off similar to the one we saw in February 2025. Therefore, using options to define risk or setting tight stop-losses below the key $4,842 support level is a prudent strategy.
We must also remember the underlying support from central bank buying. New data from the World Gold Council shows that central banks continued their record-breaking purchases through 2025, adding over 1,000 tonnes to global reserves. This ongoing demand provides a strong long-term foundation for the gold price.
