Gold stabilises after sharp correction as dip buying emerges

LONDON (February 2) Gold (XAU/USD) stabilises on Monday with dip-buying interest emerging after a sharp correction from last week’s surge to fresh all-time highs near $5,600. At the time of writing, XAU/USD trades around $4,770, recovering after an intraday slide of nearly 10% to over three-week lows near $4,402.

The precious metal suffered its largest intraday decline in decades on Friday, ending the day down 10.7%, as elevated volatility and thin liquidity triggered forced liquidations and heavy profit-taking at record levels.

Selling pressure intensified further as markets tilted toward a more hawkish monetary policy outlook after US President Donald Trump nominated former Federal Reserve (Fed) Governor Kevin Warsh as the next Fed Chair.

Despite the sharp correction, the broader uptrend in Gold remains intact. The macro backdrop stays supportive, with persistent geopolitical risks and economic uncertainties continuing to underpin demand. At the same time, robust institutional and investment flows remain a key source of support.

Looking ahead this week, a heavy slate of US labour market data is set to steer near-term price action, with the spotlight firmly on Friday’s Nonfarm Payrolls (NFP) report. The ISM Manufacturing Purchasing Managers Index (PMI) is also due later on Monday.

Market movers: Geopolitics, margin hikes and Fed signals in focus

• The United States (US) government entered a partial shutdown on Saturday after a midnight funding deadline passed without approval from the US Congress for the 2026 budget. Disruptions are expected to be limited, as the House of Representatives is set to vote early next week on a deal backed by the US Senate.
• US-Iran tensions keep geopolitical risks in play, with Iran’s Supreme Leader Ayatollah Khamenei warning that any US attack would trigger a "regional war" after US President Donald Trump issued fresh warnings of potential military action over Iran’s nuclear programme.
• The CME Group is raising margin requirements on COMEX Gold and Silver futures due to heightened market volatility, with Gold margins set to rise to 8% from 6% and Silver margins to 15% from 11%. The changes take effect after the market closes on Monday. Higher margins mean traders must put up more capital to hold positions, which can dampen speculative activity in precious metals.
• The nomination of former Fed Governor Kevin Warsh as the next Fed Chair has also helped ease some concerns surrounding the ongoing debate over the Fed's independence. Investors broadly view Warsh as a more institutional, policy-insider candidate compared with other potential contenders.
• The Fed kept its benchmark interest rate unchanged at 3.50%-3.75% last week. Fed Governor Christopher Waller said he dissented in favour of a 25-basis-point rate cut, arguing that policy remains too restrictive and should move closer to a neutral level near 3%. In contrast, Atlanta Fed President Raphael Bostic said the central bank should remain patient and needs clearer evidence that inflation is returning to its 2% target.

FXStreet