The dollar vs gold: there will be no winners

XAU/USD

Key zone: 5,000.00 - 5,150.00

Buy: 5,200.00 (on a confident breakout of the 5.150 level); target 5,400-5.550; StopLoss 5,120.00

Sell: 4,950.00 (on strong negative fundamentals); target 4,700-4,550; StopLoss 5,030.00

The fundamental backdrop is increasing pressure on gold and silver futures: the precious metals market is in a state of heightened nervousness ahead of key macroeconomic releases from the United States and new developments that may affect monetary policy.

Last week, metals showed increased volatility. The combination of overheated positioning and profit-taking led to a pullback in prices from historical highs. An additional source of instability was uncertainty surrounding the Federal Reserve’s next steps.

The key driver of long-term demand for gold remains the growth of geopolitical risks and the structural reorientation of a number of countries toward safe-haven assets amid a reduction in investments in US government debt. Under conditions of global uncertainty, investors are strengthening portfolio diversification by increasing their exposure to precious metals.

Most central banks continue to reduce their dollar reserves, and international investors increasingly choose assets outside the United States. In particular, the People’s Bank of China extended its gold purchasing program for the fifteenth consecutive month in January. According to US Treasury Secretary Bessent, the gold market in China is showing signs of overheating, forcing local exchanges to tighten margin requirements.

Similar measures are being taken by CME, while strong speculative demand is observed not only in China but also in India. Inflows into gold ETFs there have become comparable to inflows into equity-focused funds. For the first time since 1996, foreign banks collectively hold more gold in reserves than US dollars.

The Trump factor is creating long-term pressure on the US currency: current policies in the areas of trade, sanctions, migration, and national security contribute to the continued shift of global economies away from the dollar as the key reserve currency, at least until the end of the current year.

US Government Debt

This is a traditional risk factor that under the Trump administration may increase by several more trillion dollars.

Political Pressure on the Federal Reserve

Pressure on the monetary regulator and on Powell personally: the loss of the Fed’s independence may lead to artificially lower interest rates and, as a result, to a sharp weakening of the dollar.

Trade War

Tariffs are being used as an instrument of political pressure, increasing uncertainty for global markets.

Each decline in gold prices under current conditions reflects profit-taking and position reduction rather than a shift toward aggressive selling. At the same time, the metal remains above the $5000 level, which continues to be a key psychological zone and a potential technical barrier for sellers, despite buyer caution after volatility spikes.

Hedge funds and asset managers have already adjusted their positions: the so-called “smart money” has reduced net long positions in gold to the lowest levels since October. Nevertheless, in the long term, fundamental expectations remain positive.

The market audience is now effectively divided into two groups. The first began forming long positions about a year ago and is currently sitting on profits of around 70%, which is why recommendations to “hold and buy” are coming from this group. The second group entered the market at levels of $5100 and above and is currently in panic, trying to minimize losses.

From a technical perspective, buyers need to consolidate above the nearest resistance around $5050. This would open potential for a move toward $5150, where stronger resistance is expected. The next target area is the zone around $5225.

In the event of a deeper correction, sellers will attempt to regain control of the $4975 level. A break below it would be a serious blow to bullish positions and could lead to a decline toward the $4890 area, with a subsequent risk of movement toward $4830.

So we act wisely and avoid unnecessary risks.

Profits to y’all!