Forex News
- Gold stabilises after a brutal correction from record highs.
- Geopolitical tensions and institutional demand continue to underpin the broader uptrend.
- XAU/USD remains technically weak on the 4-hour chart, with price holding below both the 50- and 100-period SMAs.
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 $4,705, 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.
Market movers: Geopolitics, margin hikes and Fed signals in focus
- US manufacturing data surprised to the upside, with the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) jumping to 52.6 in January, well above the 48.5 forecast and up from 47.9 in December. At the same time, the S&P Global Manufacturing PMI edged higher to 52.4 from 51.9.
- 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.
Technical analysis: XAU/USD remains bearish below moving averages
On the 4-hour chart, the near-term technical outlook for XAU/USD remains bearish. The 50-period Simple Moving Average (SMA) has turned lower and, while it still sits above the 100-period SMA, price action remains below both moving averages, keeping sellers firmly in control.
The Relative Strength Index (RSI) stands near 38, well below the 50 midline, confirming persistent bearish momentum. The 100-period SMA near $4,850 acts as nearby dynamic resistance.
Trend strength builds as the Average Directional Index (ADX) rises to 43.51, reinforcing a sustained downside phase. A sustained 4-hour close above the 100-period SMA would help ease immediate downside pressure and could open the door for a corrective rebound toward the 50-period SMA at $5,057.68.
As long as price fails to reclaim these moving averages, the path of least resistance remains to the downside, with momentum still tilted in favour of sellers.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- GBP/USD falls by around 0.17% as the US Dollar extends gains for a second day following the sharp precious metals selloff.
- Trump’s nomination of Kevin Warsh as the next Fed Chair reinforces expectations of a firmer, less-dovish Fed stance.
- US ISM Manufacturing PMI jumps into expansion at 52.6, boosting Treasury yields and Dollar demand.
The Pound Sterling (GBP) dives some 0.17% on Monday as the US Dollar (USD) extends its gains to two straight days, following the precious metals rout that pushed Gold prices down by over $1,000 after reaching a record high near $5,600. GBP/USD trades at 1.3662 after reaching a daily high of 1.3715.
Sterling weakens ahead of the BoE meeting as markets reprice a less-dovish Fed and US data beats expectations
Last Friday, US President Donald Trump nominated Kevin Warsh to be the new Fed Chair since June 2026. After the announcement, markets priced in a less 'dovish' US central bank as Warsh, a former governor at the Fed, was usually hawkish in his previous stint.
Data-wise, the US economic docket featured S&P Global Manufacturing PMI for January, showing an expansion in the sector. The ISM Manufacturing PMI crushed forecasts of a 48.5 reading and expanded by 52.6 in January, up from December’s 47.9 contraction.
In the UK, traders' focus is on the Bank of England’s (BoE) monetary policy decision, in which the central bank is expected to hold the Bank Rate steady at 3.75% on Thursday. Market participants’ attention will be on the vote split, as members have been divided during the last couple of meetings.
Worth noting that although the UK jobs market had shown signs of weakness, inflation remains the highest among the G7 industrialized countries. Therefore, the BoE could refrain from supporting the labor market.
S&P Global reported that manufacturing activity in January in the country improved the most since August 2024, indicating the economy is picking up. The Purchasers Managers Index (PMI) rose from 51.6 to 51.8, exceeding estimates.
Ahead in the week, the UK docket will feature the BoE’s monetary policy and speeches by BoE members. Across the pond, Fed officials will grab the headlines, along with Services PMI data by S&P Global and the ISM, jobless claims and January’s Nonfarm Payrolls report.
GBP/USD Price Forecast: Technical outlook
After clearing 1.3700 support, GBP/USD is poised to consolidate within the 1.3600-1.3700 area. Bullish momentum is fading as depicted by the Relative Strength Index (RSI) aiming towards its neutral level.
For a bullish continuation, buyers must clear 1.3700 and challenge 1.3750. On further strength, 1.3800 lies overhead. Conversely, if GBP/USD tumbles below 1.3650, it could exacerbate the drop to 1.3600. A breach of the latter will expose the 20-day SMA at 1.3538.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.35% | 0.33% | 0.36% | 0.41% | -0.05% | 0.13% | 1.08% | |
| EUR | -0.35% | -0.07% | 0.06% | 0.05% | -0.40% | -0.17% | 0.73% | |
| GBP | -0.33% | 0.07% | -0.02% | 0.12% | -0.34% | -0.15% | 0.79% | |
| JPY | -0.36% | -0.06% | 0.02% | 0.04% | -0.44% | -0.21% | 0.44% | |
| CAD | -0.41% | -0.05% | -0.12% | -0.04% | -0.43% | -0.27% | 0.67% | |
| AUD | 0.05% | 0.40% | 0.34% | 0.44% | 0.43% | 0.19% | 1.13% | |
| NZD | -0.13% | 0.17% | 0.15% | 0.21% | 0.27% | -0.19% | 0.95% | |
| CHF | -1.08% | -0.73% | -0.79% | -0.44% | -0.67% | -1.13% | -0.95% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
- US ISM Manufacturing PMI rose into expansion territory in January.
- USD Index stays in positive territory near 97.50.
The business activity in the US manufacturing sector expanded in January, with the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) improving to 52.6 from 47.9 in December. This reading came in better than the market expectation of 48.5.
Other details of the publication showed that the Employment Index of the PMI survey rose to 48.1 from 44.9 in this period, while the New Orders Index jumped to 57.1 from 47.7. Finally, the Prices Paid Index, also known as the inflation component, edged higher to 59 from 58.5.
Assessing the findings of the survey, "in January, US manufacturing activity returned to expansion territory, with improvements in all five subindexes that make up the PMI, though the Employment and Inventories indexes still remain in contraction," said Susan Spence, Chair of the ISM Manufacturing Business Survey Committee.
"Although these are positive signs for the start of the year, they are tempered by commentary citing that January is a reorder month after the holidays, and some buying appears to be to get ahead of expected price increases due to ongoing tariff issues," Spence added.
Market reaction to US ISM Manufacturing PMI data
The US Dollar (USD) Index gains traction in the American session and was last seen rising 0.35% on the day at 97.50.
- USD/CHF extends its rebound as markets reassess the Fed outlook after Kevin Warsh is nominated as the next Fed Chair.
- Technically, the pair remains fragile below the 0.7850 resistance zone despite a short-term bounce from the 0.7600 area.
- Momentum stays soft, with RSI still below 50, suggesting the rebound remains corrective for now.
The Swiss Franc (CHF) trades on the back foot against the US Dollar (USD) on Monday, as the nomination of former Federal Reserve (Fed) Governor Kevin Warsh as the next Fed Chair helps the Greenback recover from four-year lows.
At the time of writing, USD/CHF is trading around 0.7790, extending gains for a second straight day after sliding to its lowest level since August 2011 last week.
Traders are now reassessing the Fed’s monetary policy outlook, as Warsh is generally regarded as an inflation hawk, prompting markets to scale back fears of aggressive rate cuts under political pressure.
This marks a clear shift from earlier concerns that US President Donald Trump’s nominee could tilt the central bank toward a more dovish policy path, given the President’s repeated calls for lower interest rates.
Against this backdrop, investors are rotating back into the Greenback amid improving near-term sentiment. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 97.41, up nearly 0.30% on the day.
From a technical perspective, USD/CHF remains vulnerable to further downside after breaking a multi-month support zone near 0.7850 last week. The sell-off was accompanied by a clear expansion in the Bollinger Bands, pointing to rising volatility.
That said, the very near-term bias has stabilised after buyers stepped in around the 0.7600 psychological level, triggering a modest rebound. The Relative Strength Index (RSI) stands near 43, recovering from near-oversold territory, but it remains below the 50 threshold, signalling that upside momentum is still weak.
On the upside, a sustained recovery looks capped unless the pair can reclaim the 0.7850 area. A clear break above this former support would expose the mid-Bollinger band near 0.7889 as the next upside target.
On the downside, immediate support is seen at the 0.7700 round level, followed by the lower Bollinger band near 0.7627.
Trend conditions remain firm, with the Average Directional Index (ADX) around 35, suggesting that the broader move still favours sellers despite the current corrective bounce.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
HSBC's report highlights a robust start for Emerging Markets (EM) in 2026, with the MSCI EM index rising approximately 11% in USD terms. This performance contrasts with a mere 2% increase for the MSCI US index. The report attributes this outperformance to improvements in regional structural stories and company fundamentals, alongside a decline in the US Dollar.
Emerging Markets outperforming US stocks
"Overall, EMs are proving again in 2026 that they can be both lucky and good, with the tailwind of dollar weakness acting as a catalyst for attractive structural stories and improving fundamentals and profits."
"Amid further signs that global investors have cooled towards dollar assets – with the dollar itself falling sharply last week – the EM momentum trend is accelerating."
"Some EM specialists point to structural reforms and the prospect of lower rates providing relief to the fiscal outlook as positives."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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