Gold price (XAU/USD) extends its steady intraday descent through the first half of the European session on Thursday and for now, seems to have snapped a five-day winning streak to the all-time peak through the previous day. A modest US Dollar (USD) rebound from over a one-week low, along with a positive risk tone, prompts bullish traders to take some profits off the table amid slightly overbought conditions. The fundamental backdrop, however, warrants some caution before confirming that the commodity has topped out and positioning for deeper losses. 

Investors remain concerned about the potential economic fallout from US President Donald Trump’s protectionist policies and escalating US-China trade war, which should continue to underpin the safe-haven Gold price. Apart from this, expectations that the Federal Reserve (Fed) would stick to its easing bias, along with the recent fall in the US Treasury bond yields, could act as a headwind for the USD and contribute to limiting the downside for the bullion. Traders now look forward to the release of the US Weekly Initial Jobless Claims data for short-term opportunities. 

• US President Donald Trump’s new 10% tariffs on Chinese imports came into effect on Tuesday. Furthermore, China announced retaliatory tariffs on some US goods, fueling worries about an escalating trade war and lifting the safe-haven Gold price to a fresh record high on Wednesday. 
• The Automatic Data Processing (ADP) reported that private-sector added 183K in January compared to the previous month’s upwardly revised reading of 176K. This, however, was offset by the disappointing release of the US ISM Services PMI, which declined to 52.8 in January. 
• The US Treasury yields dropped to their lowest level since mid-December in reaction to the softer data. Moreover, expectations the Federal Reserve will lower borrowing costs twice this year drag the US Dollar to over a one-week low and further benefit the non-yielding yellow metal. 
• US Treasury Secretary Scott Bessent said late Wednesday, the focus is on bringing down 10-year Treasury yields, rather than the Fed’s benchmark short-term interest rate. Bessent added that interest rates will take care of themselves if we get energy costs down and deregulate the economy.
• The USD bulls failed to gain respite from Fed Vice Chair Philip Jefferson’s hawkish remarks on Thursday, saying that he is happy to keep the Fed Funds on hold at the current level. He will wait to see the net effect of US President Donald Trump’s policies, Jefferson noted further.
• Investors are looking to the US monthly employment details – popularly known as the Nonfarm Payrolls report – on Friday for further clues on the outlook for rates. In the meantime, traders on Thursday will take cues from the release of the usual US Weekly Initial Jobless Claims data. 

By Haresh Menghani