Gold (XAU/USD) sticks to modest intraday gains, above the $5,000 psychological mark, through the first half of the European session, though it lacks bullish conviction amid mixed cues. The third round of US-mediated negotiations between Ukraine and Russia concluded in Geneva on Wednesday without any major breakthrough. This underscores that substantive disagreements remain over the status of eastern Ukrainian territories occupied by Russian forces. Furthermore, reports suggest that the US military is ready to attack Iran as early as this weekend. Although US President Donald Trump has not made a final decision yet on whether to authorize an armed confrontation, this keeps geopolitical risks in play and underpins the safe-haven commodity.
Meanwhile, Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting, released on Wednesday, showed that policymakers remain deeply divided over the necessity and timing of further interest rate cuts. In fact, several Fed officials indicated that more rate cuts could be warranted if inflation declines as expected, while others cautioned that easing too early could compromise the central bank’s 2% inflation target. This followed the upbeat US data, which showed that Industrial Production increased more than anticipated in January and manufacturing output rose by the most in 11 months, backing the case for the Fed to hold interest rates steady. This assists the US Dollar (USD) in preserving the previous day’s strong gains and might keep a lid on the non-yielding Gold.
This, in turn, warrants some caution for aggressive bullish traders and makes it prudent to wait for some follow-through selling before positioning for a further appreciating move for the XAU/USD pair. Traders now look to Thursday’s US economic docket – featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Pending Home Sales data. Apart from this, speeches from influential FOMC members will drive the USD and the Gold price later during the North American session. The focus, however, will remain glued to the US Personal Consumption Expenditure (PCE) Price Index, due on Friday, which should provide cues about the Fed’s rate-cut path. This, in turn, will drive the USD and provide some meaningful impetus to the precious metal.
XAU/USD 1-hour chart
Gold seems poised to build on gains while above the 100-hour SMA breakpoint
The commodity now seems to have found acceptance above the 100-hour Simple Moving Average (SMA), though the overnight failure to find acceptance above the $5,000 mark warrants caution for bullish traders. Moreover, the 100-hour SMA slopes downward, underscoring lingering bearish pressure. Moreover, the Moving Average Convergence Divergence (MACD) line has slipped below the Signal line near the zero mark, and the histogram turned negative, suggesting waning upside momentum.
The Relative Strength Index (RSI) prints at 59 (neutral), reflecting balanced conditions after the earlier overbought stretch. The 100-hour SMA at $4,956.71 serves as immediate dynamic support. Despite its decline, the SMA continues to support the intraday structure as long as the XAU/USD pair trades above it. A bullish crossover in the MACD and a sustained move back above zero would improve momentum, and an RSI push through 60 would reinforce follow-through on the upside. Conversely, a close below the SMA would hand the initiative back to sellers and expose the risk of a deeper pullback.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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