Gold eases below $4,500 as markets turn cautious ahead of US data

LONDON (January 7) Gold (XAU/USD) trades on the back foot on Wednesday as selling pressure emerges near the $4,500 psychological mark, prompting mild profit-taking at elevated levels.

At the time of writing, XAU/USD is trading around $4,452, down nearly 0.90% on the day, as traders reposition ahead of US economic releases due later in the American trading session.

Despite the modest pullback, the downside appears limited so far, with dip-buying interest likely to pick up as ongoing geopolitical tensions keep broader market sentiment fragile and safe-haven demand intact for Bullion.

At the same time, sustained expectations of further monetary policy easing by the Federal Reserve (Fed) continue to provide an additional layer of support. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets, such as Gold.

Looking ahead, traders are refraining from aggressive directional bets ahead of a busy US data slate that could shape the near-term direction of the US Dollar (USD) and Gold. The economic calendar features the ADP Employment Change report, Factory Orders, the ISM Services Purchasing Managers Index (PMI), and the JOLTS Job Openings survey.

Market movers: US data, Fed outlook and geopolitical risks steer market sentiment

• US-Venezuela standoff remains front and centre after a dramatic US military operation over the weekend led to the capture and ousting of Venezuelan President Nicolás Maduro. In the latest developments, US President Donald Trump said late Tuesday that Venezuela would turn over between 30 million and 50 million barrels of Oil to the US at market prices, with proceeds intended to benefit both nations. Venezuela holds the world’s largest proven Crude Oil reserves at roughly 303 billion barrels.
• Renewed US strategic interest in Greenland is adding to geopolitical tensions. The White House said on Tuesday that President Donald Trump and his advisers are “discussing a range of options” to acquire Greenland, adding that the use of the military “is always an option.”
• Data released so far this week point to cooling momentum in the US economy. The latest S&P Global PMI surveys showed business activity losing steam in December, with the Services PMI easing to 52.5 from 54.1 and the Composite PMI slipping to 52.7 from 54.2. Meanwhile, the ISM Manufacturing PMI remained in contraction territory at 47.9, easing from November’s 48.2.
• On the monetary policy front, markets are pricing in around two interest rate cuts this year amid signs of labour market cooling and moderating inflation. However, the Fed is widely expected to keep interest rates unchanged at its January 27-28 meeting, with upcoming data, especially Friday’s Nonfarm Payrolls (NFP) report, likely to shape near-term policy expectations.
• Central bank buying, widening fiscal deficits, lower US interest rates, and ongoing geopolitical risks are expected to propel gold prices toward $5,000 by the end of the first quarter, even as the broader commodities rally continues, according to Dominic Schnider, Head of Commodities and APAC Forex CIO at UBS Wealth Management, as cited in a report published by Kitco.

FXStreet