Gold drifts lower as profit-taking kicks in after a five-day record-setting rally

Daily Digest Market Movers: Gold witnesses profit-taking amid receding safe-haven demand, USD uptick

US President Donald Trump pulled back from his tariff threats and said on Wednesday that he had reached an agreement on a framework for a future deal on Greenland with NATO. The relief spurred a follow-through rally on Wall Street, and the spillover effect buoyed Asian equities on Friday.
The US Bureau of Economic Analysis published the final reading of third-quarter Gross Domestic Product, which showed that the economy expanded by 4.4%, slightly better than the second estimate of 4.3%. The reading was also well above the 3.8% growth recorded in the previous quarter.
A separate report revealed that the US Core Personal Consumption Expenditures Price Index – the Federal Reserve's preferred gauge of inflation – rose 2.8% YoY in November from 2.7% in the previous month. On a monthly basis, the gauge maintained a steady growth and recorded a 0.2% increase.
Adding to this, the US Department of Labor reported that initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 200,000 for the week ended January 17. The print was lower than consensus estimates for a reading of 212K, though it failed to impress the US Dollar bulls.
Investors seem convinced that the Fed will hold its key interest rate through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May. The markets, however, are still pricing in the possibility of two more rate reductions in 2026, which continues to weigh on the USD.
The USD Index, which tracks the Greenback against a basket of currencies, remains on track to register heavy weekly losses, reversing a major part of its gains since the beginning of 2026. This, in turn, continues to benefit the Gold and backs the case for an extension of the recent record-setting rally.
The market focus now shifts to a two-day FOMC policy meeting, starting next Tuesday. Investors will look for cues about the Fed's rate-cut path, which will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the non-yielding yellow metal.

Gold corrective slides are likely to be bought into and remain limited

This week's breakout through the top end of an ascending channel extending from late October was seen as a key trigger for the XAU/USD bulls and validates the near-term positive outlook. The Moving Average Convergence Divergence (MACD) line stands above the Signal line, with both above zero, and the positive histogram widens, suggesting strengthening bullish momentum. The RSI at 81.11 is overbought and could cap gains near term, even as the breakout favors upside continuation.

Momentum remains firm, but stretched conditions raise the risk of a pullback toward the channel floor at $4,437.46 should buyers fade. The MACD stays in positive territory and above the Signal line; a contracting histogram would hint at waning momentum and a corrective phase. RSI holds above 70, reinforcing an overbought profile that could trigger a pause before the broader uptrend resumes as long as price holds above former channel resistance.

(The technical analysis of this story was written with the help of an AI tool.)

US Dollar FAQs

What is the US Dollar?

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.

How do the decisions of the Federal Reserve impact the US Dollar?

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.

What is Quantitative Easing and how does it influence the US Dollar?

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.

What is Quantitative Tightening and how does it influence the 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.