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Gold (XAU/USD) trims some of its earlier losses on Thursday as traders book profits following the Federal Reserve’s (Fed) monetary policy decision, which barely moved the needle as the yellow metal seems poised to record its best month since the 1980s. At the time of writing, XAU/USD trades at $5,315, down 1.83%.

Bullion pares earlier losses as profit-taking follows the Fed hold, poised for historic monthly gains

The yellow metal hit a record high near $5,600 on Thursday before volatility in the financial markets spiked, sending Bullion prices towards its daily low at $5,098.

During the day, the financial markets witnessed a plunge in precious metals, which also sent Silver prices to a daily low of $106.62 a troy, with the Nasdaq also plunging while Bitcoin and Ethereum followed suit.

Although speculation suggests that escalating tensions between the US and Iran could have been the trigger, it seems that investors took some of their chips off the table, amid the ongoing parabolic run that keeps Gold up 23% year-to-date (YTD).

In the meantime, the nominee to succeed Jerome Powell as the Chair of the Federal Reserve will be named next week, revealed US President Donald Trump.

Data-wise, the US economic docket revealed jobs data as the number of Americans filing for unemployment benefits rose above estimates, according to the Department of Labor. At the same time, the US trade deficit widened the most since March 1992, rising to $56 billion in November, due to a surge in capital goods imports.

The Federal Reserve held rates unchanged on Wednesday, signaling that it would adopt a cautious approach and decide policy meeting by meeting.

Ahead this week, the US economic docket will feature December’s Producer Price Index (PPI) data, the Chicago Fed PMI and speeches by Fed Governor Michelle Bowman and St. Louis Fed President Alberto Musalem.

Daily market movers: Gold's advance halts as the Dollar recovers

• The drivers behind Gold's move have been the US Dollar being steady and, investors booking profits. The US Dollar Index (DXY), which measures the performance of the buck’s value against a basket of six currencies, is nearly flat at 96.27.
• Falling US Treasury bond yields capped Gold’s losses, as the 10-year Treasury note is down two basis points at 4.227%, as of writing.
• The Labor Department revealed that the number of Americans filing for unemployment benefits dipped from upwardly revised 210K figures to 209K in the week ending January 24. Economists expected 205K claims for the latest week. Continuing Claims fell from 1.865 million to 1.827 million, beneath estimates of 1.86 million, an indication that the labor market had stabilized, as stated by the Fed Chair Jerome Powell at his presser.
• After the Fed’s decision, money markets are still expecting 48 basis points of easing, according to Prime Market Terminal Data.

(Click on image to enlarge)

Source: Prime Market Terminal

• On Thursday, UBS increased its forecast for Gold prices to $6,200 a troy ounce for March, June and September, up from $5,000 foreseen. Nevertheless, by the end of the year, they expect Bullion to finish at around $5,900.

Technical outlook: Gold lacks clear direction following volatile session

Gold price remains upward biased, but it seems poised to consolidate if it doesn’t close above the January 28 daily high of $5,415. Bullish momentum has faded as depicted by the Relative Strength Index (RSI).

The RSI dipped from extreme overbought territory, yet as it aims towards the 70 threshold, it indicates that neither buyers nor sellers are in charge.

If XAU/USD stays above $5,300, it could trade sideways within the $5,300-$5,400 range. A break at the top of the range will expose $5,500 and the record high at $5,598. Conversely, if Gold dives below $5,300, it could exacerbate a drop towards $5,200 and below.

(Click on image to enlarge)

Gold Daily Chart

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