Gold moves away from record high as safe-haven demand fades on easing trade war concerns

FXStreetJan 22, 2026 4:09 AM

Gold extends its corrective slide from record highs amid receding safe-haven demand.
Softening ‘Sell America’ trades back the USD, which also weigh on the precious metal.
Traders now look to the US PCE data for Fed rate cut cues and some meaningful impetus.

Gold (XAU/USD) is seen extending the previous day's modest pullback from the vicinity of the $4,900 mark, or a fresh all-time peak, and drifting lower through the Asian session on Thursday. This marks the first day of a negative move in the previous four and is sponsored by a combination of negative factors. US President Donald Trump pulled back from his threat to slap additional tariffs on eight European nations and ruled out seizing Greenland by force, triggering a fresh wave of the global risk-on trade and undermining the safe-haven precious metal.

Meanwhile, the so-called 'Sell America' trade recedes on the back of easing trade war fears. Adding to this, reduced bets for two more rate cuts by the US Federal Reserve (Fed) in 2026 offer support to the US Dollar (USD), which further exerts pressure on the Gold. The downside, however, remains cushioned as traders opt to wait for the US Personal Consumption Expenditures (PCE) Price Index and the final US Q3 GDP report. The data will be looked for cues about the Fed's future policy path, which could drive the buck and the XAU/USD pair in the near term.

Daily Digest Market Movers: Gold drifts lower amid easing trade war fears, ahead of key US data

The global risk sentiment gets a strong boost in reaction to US President Donald Trump's U-turn on Greenland and drags the traditional safe-haven Gold away from the record high, touched on Wednesday.
Trump said at the World Economic Forum in Davos that he had reached an agreement on a framework for a future deal on Greenland with NATO, ending the need to impose new tariffs on European nations.
The development removes the tail risk of a US confrontation with NATO allies, triggering the reversal of the “Sell America” trade, which acts as a tailwind for the US Dollar and further undermines the bullion.
US Special Envoy Steve Witkoff announced a new meeting with Russian President Vladimir Putin that’s set to take place on Thursday amid progress with discussions over a US-led 20-point Ukraine peace plan.
Meanwhile, Trump said on Wednesday that Ukrainian President Volodymyr Zelensky and Putin were now at a point where they could reach a deal to end the war, further undermining the precious metal.
According to a Reuters poll, a majority of economists expect that the US Federal Reserve will hold its key interest rate through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May.
Traders, however, are still pricing in the possibility of two more rate reductions in 2026. Moreover, concerns about political interference in the Fed's independent setting of rates cap the USD upside.
Hence, the release of the US Personal Consumption Expenditure (PCE) Price Index, along with the final US Q3 GDP report, due later today, will influence the USD price action and drive the XAU/USD pair.

Gold needs to weaken below 38.2% Fibo. level to back the case for any further corrective slide

The 100-hour Simple Moving Average (SMA) continues to rise and lies beneath the price, supporting the near-term uptrend. The XAU/USD pair holds above this gauge, keeping the bias tilted higher, with the SMA at $4,707.80 acting as dynamic support. The Moving Average Convergence Divergence (MACD) line remains below the Signal line and below zero, while the negative histogram contracts, suggesting fading bearish momentum. The Relative Strength Index (RSI) stands at 46 (neutral) after cooling from prior extremes.

Measured from the $4,535.22 low to the $4,889.37 high, the 38.2% Fibonacci retracement at $4,754.08 offers initial support, while the 23.6% Fibo. level at $4,805.79 cushions dips; holding above these supports would keep the recovery path intact. Near-term, continued price acceptance above the rising 100-hour SMA keeps the path of least resistance to the upside. Momentum would firm if the MACD turns up through its Signal line and the RSI reclaims 50, while failure to hold above the average would leave the market vulnerable to a deeper pullback and extend consolidation.

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

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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