Gold capped as risk appetite offsets softer USD before NFP

• Gold rebounds and trims some of the modest losses recorded in the previous session.
• Ongoing weakness in the US Dollar, driven by expectations surrounding the Federal Reserve, continues to support the metal.
• However, positive market sentiment could limit further gains as investors wait for the upcoming US Nonfarm Payrolls (NFP) report.

Gold (XAU/USD) maintains modest intraday gains above the $5,050 mark as it heads into Wednesday’s European session. Expectations of additional interest rate cuts by the US Federal Reserve (Fed) have pushed the US Dollar (USD) to a near two-week low, providing support for the non-yielding precious metal. However, prevailing risk-on sentiment could limit further upside for the safe-haven asset. Traders may also prefer to stay on the sidelines ahead of the US Nonfarm Payrolls (NFP) report before committing to fresh bullish positions.

On Tuesday, the US Census Bureau reported that Retail Sales were flat in December, following a 0.6% increase in November and falling short of the 0.4% growth forecast. Combined with signs of cooling in the US labor market, the data has led economists to lower their fourth-quarter growth projections, reinforcing expectations of further Fed rate cuts. Money markets are currently pricing in around 58 basis points of easing in 2026, a factor that continues to weigh on the Greenback.

At the same time, worries over the Federal Reserve’s independence resurfaced after US President Donald Trump stated on Saturday that he could take legal action against his newly nominated Fed Chair, Kevin Warsh, if interest rates were not reduced. Adding to the debate, Fed Governor Stephan Miran remarked that complete central bank independence is unattainable. These developments overshadowed hawkish remarks from regional Fed Presidents Lorie Logan and Beth Hammack and offered little support to the US Dollar. As a result, Gold appears to retain a favorable upward bias.

Dallas Fed President Lorie Logan noted that the labor market is stabilizing and downside risks are fading, while inflation has remained above the 2% target for nearly five years. She added that current monetary policy may be close to neutral, exerting limited restraint on the economy. Similarly, Cleveland Fed President Beth Hammack said the policy rate is near neutral territory, putting the Fed in a strong position to assess incoming data. Hammack also suggested that rates could remain unchanged “for quite some time,” given persistently elevated inflation and ongoing tariff-related uncertainties.

Despite this supportive backdrop, XAU/USD bulls appear cautious and may prefer to await the US monthly employment report for clearer signals on the Fed’s policy path. The outcome will likely shape near-term US Dollar movements and provide fresh direction for Gold. Meanwhile, improved risk sentiment and indications of easing tensions in the Middle East could temper demand for the safe-haven metal. Therefore, waiting for solid follow-through buying may be prudent before anticipating further gains.

Gold must break above the $5,090 resistance area to reinforce the outlook for further upside.

From a technical standpoint, XAU/USD demonstrated resilience below the 200-period Simple Moving Average (SMA) on the 4-hour chart earlier this month. The SMA continues to slope upward and remains comfortably beneath the current price, reinforcing the broader bullish bias. As long as the pair holds above this level, the overall trajectory remains skewed to the upside.

That said, momentum indicators point to some consolidation. The Moving Average Convergence Divergence (MACD) remains above the Signal line and in positive territory, though the narrowing histogram indicates waning upward momentum. Meanwhile, the Relative Strength Index (RSI) hovers around 56, reflecting neutral-to-slightly bullish conditions and supporting a consolidative outlook. This suggests it may be wise to wait for a decisive move above the $5,090 resistance level before targeting additional gains.

A continued contraction in the MACD histogram could signal a pause or range-bound trading, whereas a renewed expansion would indicate a resurgence in bullish momentum. Additionally, with the RSI holding above 50, the underlying bias remains constructive; a climb toward 60 would further strengthen upside prospects. Overall, the technical setup favors buying on modest pullbacks while momentum stabilizes.

Sources: Haresh Menghani