- Gold futures found some profit-taking, snapping the 2-day rally to one-week highs.
- Geopolitical factors and the Fed’s easing stance continue to favor gold futures.
- Markets await today’s US ADP jobs data ahead of Friday’s NFP.
Gold futures are beginning to show signs of exhaustion near the $4,580 mark after a sharp two-day rally, with prices struggling to maintain recent gains. During Asian trading, the market briefly reached a one-week high before finding selling pressure as traders locked in profits against a generally risk-friendly environment. The safe-haven demand has decreased as a result of equity markets reaching new highs, encouraging a temporary cooling of gold prices without causing a significant decline.
Nevertheless, there is still strong underlying support for gold futures. Although investors are selectively ignoring headline risks, geopolitical uncertainty still looms over the markets. Although the situation is still unstable, US military action in Venezuela has not yet intensified. Investors have been on guard due to President Donald Trump’s renewed threats against Greenland and his harsher rhetoric toward Mexico and Colombia. Gold’s function as a hedge against geopolitical shocks is strengthened due to these developments, which exacerbate ongoing tensions related to Iran, the Middle East, and Ukraine.
On the macroeconomic front, gold continues to benefit from expectations surrounding US monetary policy. As markets factor in the possibility of interest rate cuts later this year, the US dollar has struggled to maintain its upward momentum. Futures pricing reflects a growing belief that the Federal Reserve may start easing as early as March with one more cut before the end of the year. Lower interest rates help stabilize prices during times of consolidation by reducing the opportunity cost of holding non-yielding assets, such as gold.
However, traders seem cautious ahead of a busy US data calendar. Wednesday’s ADP employment report may impact short-term positioning, the ISM Services PMI, and the JOLTS job openings report, but Friday’s Nonfarm Payrolls report is the primary focus. A lower-than-expected reading could swiftly restore bullish momentum in gold futures, as job growth is anticipated to slow down. Stronger labor data, on the other hand, might strengthen the dollar and cause a deeper, albeit probably corrective, decline.
The overall trend for gold futures remains positive, despite short-term volatility. If macro and geopolitical conditions continue to be favorable, prices could rise further as they are currently trading below December’s record highs. Long-term pillars for the market are still global uncertainty and central bank buying. For the time being, consolidation close to current levels appears to be more of a pause within an uptrend than a sign of reversal.
