Gold prices fell to around $4,430, a drop of nearly 1.4%. This change was largely due to mixed signals from the US economy. The ADP report indicated that private payrolls increased by only 41,000, which was lower than expected. On the other hand, the ISM Services PMI came in strong at 54.4, exceeding forecasts. Job openings also decreased to 7.146 million, falling short of the 7.6 million expected. Nonetheless, the expectation that the Federal Reserve will continue to ease monetary policy helps support gold prices since lower interest rates reduce the cost of holding assets like gold. Geopolitical issues, such as the US-Venezuela conflict and US interests in Greenland, are also affecting market sentiment. Strategic developments may slow down economic momentum in the US, but recent PMI figures show the economy is cooling. The market predicts two rate cuts this year, although the Fed is likely to hold rates steady in January. Technical analysis indicates gold is above critical moving averages, which supports a positive outlook as long as it stays over $4,450. A push above $4,500 could mean a retest of the all-time high from December.

Gold As A Safe Haven And Hedge

Gold is often viewed as a safe haven and a hedge against inflation. Central banks in China, India, and Turkey have notably increased their gold reserves. Geopolitical instability and interest rates are key factors influencing gold prices, with the strength of the US Dollar also playing a significant role. Gold is currently taking a pause after struggling to stay above $4,500, which makes sense given mixed economic signals from last year. The strong ISM Services PMI from December 2025 initially helped the US Dollar, but weak private payroll numbers and declining job openings hint that the labor market is slowing down. Gold appears to have solid support due to geopolitical tensions, especially around the US-Venezuela situation. Following the ousting of Maduro last weekend, there are now reports of delays in promised oil shipments, creating further uncertainty. This ongoing instability in a region rich in oil keeps demand for gold as a safe haven strong.

Focus On The Federal Reserve

Now, we need to pay attention to what the Federal Reserve will do next, with this Friday’s Nonfarm Payrolls report being crucial. Job growth in the US slowed significantly in 2025 compared to the pace in 2024, and another weak report would solidify expectations for two rate cuts this year. Early inflation forecasts for December 2025 suggest continued easing, supporting the case for the Fed to adjust its policies. It’s also important to consider the strong support coming from central banks, which acts as a cushion against deeper price drops. Final data for 2025 indicates that global central banks added a record 1,215 tonnes of gold to their reserves, exceeding the massive buying we saw in 2022. This consistent demand suggests that any significant price decline will likely lead to strong buying from institutions. In the upcoming weeks, using options to express a bullish stance seems wise given the potential for sudden price swings from news events. Buying call options with a strike price above $4,500 allows investors to participate in a breakout while managing risk, making this a smart move as overall market volatility increases. We see the $4,400 level as crucial support, where interest in buying the dip should return for those looking to establish new long positions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now