Gold traded above $5,050 in Europe on Wednesday. Prices were supported by a weaker US Dollar, which hovered near a two-week low, and by expectations of more Federal Reserve rate cuts. Traders stayed cautious ahead of the US Nonfarm Payrolls report. At the same time, stronger overall risk appetite reduced demand for safe-haven assets.
US Retail Sales were flat in December, following a 0.6% rise in November. The result also missed expectations for a 0.4% increase. Money markets now price in 58 basis points of Fed easing in 2026, which is weighing on the Dollar.
Fed Independence In Focus
Fed independence drew attention after President Donald Trump said he might sue Fed chair nominee Kevin Warsh if rates were not lowered. Fed Governor Stephen Miran said full central bank independence is impossible. Meanwhile, regional Fed Presidents Lorie Logan and Beth Hammack delivered more hawkish comments.
Logan said the labour market is stabilising and that inflation has been above the 2% target for nearly five years. She added that policy is close to neutral. Hammack said the target rate is near neutral and could remain on hold “for quite some time,” because inflation is still high and tariffs remain a factor.
On the charts, gold stayed above the rising 200-period 4-hour SMA. RSI stood at 56, while MACD remained positive but showed fading momentum. Traders are watching a move above $5,090 for confirmation and follow-through.
Gold is also being lifted by expectations for more Fed rate cuts this year, which has kept the US Dollar near a two-week low. The flat retail sales reading from December 2025 helped start this move, and newer data has supported it. This backdrop provides a clear near-term tailwind for gold.
Weak Growth Versus Sticky Inflation
Signs of slowing growth are increasing, which strengthens the case for Fed easing. Last week’s January Nonfarm Payrolls report showed job gains of just 145,000, below forecasts and consistent with a cooling labour market. A US Census Bureau report also showed January retail sales falling by 0.3%, reinforcing expectations that the Fed may need to respond soon.
Still, some Fed officials remain cautious because inflation is not fully under control. January data showed core inflation holding at 3.1% year-over-year, supporting the view that policy could stay on hold. This tension—softer growth versus stubborn inflation—adds uncertainty for traders.
For derivatives traders, this environment may favour using options to seek upside while limiting risk. One approach is call spreads with strikes above the $5,090 resistance level, which can offer cheaper upside exposure if new data increases pressure on the Fed. Implied volatility often rises ahead of Fed meetings, so some traders may prefer to position earlier rather than later.
A similar setup occurred ahead of the Fed’s 2019 easing cycle. Gold rallied in the months *before* the first rate cut as markets anticipated a shift in policy. Today’s pricing of 58 basis points of cuts echoes that pattern.
From a technical perspective, the bias remains to buy dips as long as price holds above key moving averages. The softer MACD momentum suggests it may be better not to chase the market at current levels. Instead, pullbacks can offer better entry points, with a sustained break below the 200-period 4-hour moving average used as a clear stop-loss signal.
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