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Gold dipped nearly 1% on Monday, retreating below the $5,000 mark, as the US Dollar regained strength during a quiet trading session. With US markets closed for Presidents’ Day and China observing its New Year holiday, liquidity remained thin, amplifying price swings. At the time of writing, gold (XAU/USD) traded around $4,992 after briefly reaching a daily high of $5,054.
Dollar Rebound Pressures Gold
Despite expectations that the Federal Reserve may ease interest rates later this year, a stronger US Dollar pushed bullion prices lower. The US Dollar Index edged above 97, reflecting renewed confidence in the greenback. Last week’s strong US jobs report and steady inflation data contributed to investor optimism about economic resilience, but did not stop the Dollar from making a comeback.
US Treasury yields fell slightly last week, signaling anticipation of potential rate cuts. However, some Federal Reserve officials highlighted persistent inflation in the services sector, suggesting that any easing may be gradual.
Geopolitical Tensions Add Uncertainty
Meanwhile, geopolitical risks continue to influence market sentiment. Iran’s Revolutionary Guards conducted naval exercises in the Strait of Hormuz amid rising tensions with the US. Russia and Ukraine are scheduled for talks in Geneva later this week, with territorial disputes among the key topics. Such events often prompt investors to keep a close watch on gold as a safe-haven asset, though trading has been subdued amid holiday closures.
Key Support Levels for Gold
Technically, gold faces challenges as buyers appear hesitant after three consecutive sessions of lower highs. A close below $5,000 could open the door to further declines toward $4,900 and $4,800, with longer-term support around $4,634. On the upside, a recovery above $5,050 could push prices toward the February 11 high of $5,119.
Gold remains a preferred store of value, historically serving as a hedge against inflation and currency depreciation. Its appeal persists during uncertain times, whether driven by economic data or geopolitical developments.
Week Ahead: Market Focus
Investors will monitor a packed US economic calendar, including housing data, durable goods orders, and key Federal Reserve minutes. Later in the week, focus will shift to unemployment claims, GDP updates, and core inflation readings, all of which may influence gold and broader market sentiment.
With thin liquidity and ongoing global uncertainties, gold is poised for cautious trading as the market navigates both economic signals and geopolitical risks.
