Gold prices fell by over 0.70% as traders took profits, prompted by unexpectedly strong US job market data. Concerns about the potential for Federal Reserve rate cuts contributed to gold’s trading price of $4,580. The market pressure on gold came from solid US economic data and decreased geopolitical risks, which led many traders to rethink their earlier predictions about Federal Reserve easing. Uncertainty regarding President Donald Trump’s choice of Kevin Hassett as Fed Chair also swayed market sentiments, affecting both gold and the US Dollar.

Federal Reserve Speculations

Kevin Warsh is now seen as a strong candidate for Fed Chair. His chances have risen from about 40% to 60%. Although tensions between the US and Iran have eased, military action could still be possible if Iran resumes certain activities. US Industrial Production rose 0.4%, surprising analysts who expected a 0.1% decline. Coming up are important US reports, including housing data, unemployment claims, and the final GDP reading for Q3 2025. Inflation indicators are mixed, with the Consumer Price Index (CPI) stable but the Producer Price Index (PPI) rising. Jobless claims have decreased, which suggests a strong labor market. Traders are now forecasting 43 basis points of easing from the Federal Reserve by late 2026. Gold’s price dropped below $4,600, facing resistance at $4,550. Price trends for gold are influenced by several factors, such as inflation expectations, interest rates, and the strength of the US Dollar. Central banks, especially from emerging markets, are still increasing their gold reserves, which helps maintain economic stability. Gold has been under pressure as the market recalibrates its expectations for the Federal Reserve. Looking back to late 2025, strong labor and production data introduced doubts about the aggressive easing cycle we once expected. As of this week, the CME FedWatch Tool shows that traders now anticipate just one 25 basis point cut in 2026, a big change from the two cuts forecasted only weeks earlier.

Market Dynamics And Predictions

The strength of the US Dollar and rising Treasury yields are significant challenges. The 10-year yield is stable above 4.2%, which puts pressure on non-yielding gold. This scenario mirrors what we saw in early 2024 when expectations for rate cuts were also postponed. This uncertainty about the next Fed Chair has led many to view the frontrunner, Kevin Warsh, as a more hawkish option that could keep rates elevated for longer. Next week, we should expect volatility as the Fed’s preferred inflation metric, Core PCE, is released. The Cboe Gold ETF Volatility Index (GVZ) has already increased by 5% this past week, indicating that options markets are anticipating a significant price movement. Any deviation in inflation readings could push gold through important technical levels. Technically, the immediate focus is around the $4,550 mark. The latest CFTC Commitment of Traders report shows that large speculators have reduced their net long positions, confirming the profit-taking in the market. A significant drop below the January 8th low of $4,407 could lead to a larger sell-off towards the $4,300 range. Create your live VT Markets account and start trading now.

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