Gold drops under $4,600 as demand for safe-haven assets declines

Gold Prices Continue to Slide Amid Reduced Geopolitical Tensions

Gold (XAU/USD) extended its downward trend for a second consecutive day, hovering near $4,590 on Friday. The decline in gold and other precious metals comes as demand for safe-haven assets wanes, following a temporary easing of geopolitical concerns in Iran.

US President Donald Trump indicated a possible postponement of military intervention after Iran assured it would not execute protesters. Market confidence improved further as reports emerged that Israel and other regional partners encouraged the US to refrain from immediate action against Iran.

Gold, which does not yield interest, has become less attractive after Thursday’s US Initial Jobless Claims report reinforced expectations that the Federal Reserve (Fed) will maintain current interest rates for the foreseeable future. Futures markets now anticipate the next rate reduction in June, reflecting a robust labor market and ongoing concerns among policymakers about persistent inflation.

As risk appetite improves, gold’s appeal as a safe haven diminishes. President Trump also clarified that he has no intention to remove Fed Chair Jerome Powell, despite reports of possible Justice Department indictments. Additionally, Trump signaled a willingness to delay decisions on Iran while advancing trade policies focused on critical minerals and artificial intelligence chips.

Market Highlights: Gold Weakens as Fed’s Stance Supports the US Dollar

• The US Dollar Index (DXY), which tracks the dollar against a basket of six major currencies, has retreated after modest gains in the previous session. Currently, the DXY is near 99.30, helping to limit losses for gold, which is priced in dollars.
• According to the US Department of Labor, initial jobless claims unexpectedly dropped to 198,000 for the week ending January 10, beating forecasts of 215,000 and down from the previous week’s revised 207,000. This data suggests layoffs remain subdued and the labor market remains resilient despite prolonged high borrowing costs.
• The US Census Bureau reported that retail sales in November rose by 0.6% to $735.9 billion, surpassing expectations and rebounding from a 0.1% decline in October. The Producer Price Index (PPI) also showed strong growth, with both headline and core readings rising 3% year-over-year.
• Analysts at Morgan Stanley have postponed their projections for interest rate cuts to June and September, following the latest employment data, moving them from their earlier expectations of January and April.
• Minneapolis Fed President Neel Kashkari remarked at the Midwest Economic Forecast Forum that the US economy remains robust and that tariff pass-through has been less significant than anticipated. He also noted that while inflation is still elevated, it is trending downward.
• The Fed’s Beige Book observed that economic activity in the US has picked up at a "slight to modest pace" in most regions since mid-November, marking an improvement over the previous three reporting periods, which saw little change.
• Core Consumer Price Index (CPI), which excludes food and energy, increased by 0.2% in December, coming in below expectations. Annual core inflation held steady at 2.6%, matching a four-year low. Meanwhile, overall CPI rose 0.3% month-over-month in December 2025, consistent with forecasts and mirroring September’s increase. Yearly inflation remains at 2.7% as projected.

Technical Outlook: Gold’s Upward Momentum Weakens as Ascending Wedge Forms

On Friday, gold (XAU/USD) traded near $4,590. Technical analysis of the daily chart reveals that the pair is moving within a developing ascending wedge pattern, signaling that bullish momentum is fading and raising the risk of a downward reversal if prices fall below the lower trendline with significant volume.

Immediate resistance is seen at the all-time high of $4,643, reached on January 14, followed by the upper edge of the wedge near $4,660. A decisive move above this resistance zone could propel gold towards the $4,700 mark.

On the support side, the nine-day Exponential Moving Average (EMA) at $4,549 serves as the first level, with the lower boundary of the ascending wedge around $4,520 offering additional support. Should prices break below the wedge, the next target would be the 50-day EMA at $4,313.

XAU/USD: Daily Chart