Spot gold gained some follow-up buying support during the Asian trading session on Tuesday, extending its rebound from the previous day's low of $4401.58 per ounce, which was the lowest level since January 5th. It is currently trading near $4825 per ounce, with an intraday gain of approximately 3.6%. However, the upside for gold is likely to be limited due to multiple bearish factors. The removal of a major uncertainty, following the US President's nomination of Kevin Warsh to be the next Federal Reserve Chair, contributed to the positive sentiment. Furthermore, the optimistic US ISM Manufacturing PMI data released on Monday helped the US dollar largely hold onto its gains from the past two days, creating a headwind for gold.
Simultaneously, signs of easing tensions between the US and Iran concerning Iran's nuclear program, coupled with the finalization of a US-India trade agreement and the CME Group's decision to raise margin requirements for precious metal futures, have added additional downward pressure on gold. These factors, combined with a generally optimistic mood in the equity markets, caution gold bulls to be prudent before betting on further price increases. Therefore, it would be wise to wait for strong, sustained buying momentum before confirming that the recent sharp correction from the record high of $5596.33, touched last week, has concluded. The US JOLTS job openings data, due later on Tuesday, may provide fresh trading impetus.
Gold bulls are adopting a cautious stance amid the prevailing positive risk sentiment. The nomination of Kevin Warsh last Friday to succeed Jerome Powell as the next Fed Chair, pending Senate approval from May, has been a key development. Warsh's hawkish background suggests he would remain vigilant if inflation expectations begin to rise. Additionally, the CME Group's announcement over the weekend that it would increase margin requirements for precious metal futures, effective from the close of Monday's market, triggered a second consecutive day of position unwinding, dragging gold prices to a four-week low of $4401.58 on Monday.
On the economic data front, the Institute for Supply Management reported on Monday that US manufacturing activity expanded for the first time in a year. Specifically, the Manufacturing PMI for January rose significantly to 52.6, up from the previous reading of 47.9. Meanwhile, the US President announced on Monday that the United States and India had finalized a trade agreement and would immediately begin reducing tariffs on each other's goods. Furthermore, Iran and the US are expected to resume nuclear talks this Friday, further boosting investor confidence. The US Dollar Index hovered around 97.45 during the Asian session on Tuesday, largely maintaining its gains from the previous two sessions, thereby exerting some pressure on gold prices.
Traders will look to the US JOLTS job openings data for clues on Tuesday. Subsequently, the US ADP private sector employment report and the US ISM Services PMI, due on Wednesday, along with speeches from Federal Reserve officials, will collectively influence the direction of both the US dollar and gold.
Caution is warranted before making aggressive directional bets, as technical indicators for gold are presenting mixed signals. The daily chart shows gold prices demonstrating resilience above the 50-day Simple Moving Average (SMA) at 4497.09, having rebounded on Monday from the 50% Fibonacci retracement level of the rally from July 2025 to January 2026, near $4400. The upward slope of the moving average suggests that declines might find support. Furthermore, the price remains above the 38.2% Fibonacci retracement level of the aforementioned rally, around $4687, which is expected to provide near-term support. Concurrently, the Relative Strength Index (RSI) is positioned above the midline and showing a slight upward tilt, hinting at building upward momentum.
However, the Moving Average Convergence Divergence (MACD) indicator's signal line remains below both the MACD line and the zero axis, reinforcing a bearish undertone. The expanding negative histogram indicates that downward momentum is intensifying. On the upside, any further appreciation could see prices re-challenge the 23.6% Fibonacci retracement level near $5035. On the downside, a failure to defend the first support level at the 38.2% Fibonacci retracement (around $4687) would risk a continuation of the current corrective bounce.
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