Is Gold’s Rally Over?

Gold’s impressive rally has hit a roadblock, as markets face a sharp turn ahead of Friday’s Non-Farm Payroll (NFP) data release. After weeks of gains pushing gold towards the $6,000 level, the precious metal has seen a dramatic reversal, with prices tumbling below $5,000 following a brutal liquidation. Traders are now questioning if the rally has truly run its course or if this is just a temporary setback.

The catalyst for gold’s downfall came on Friday, when news of Kevin Warsh’s nomination as the next Federal Reserve Chair rattled markets. Warsh’s more hawkish stance on the US dollar and his focus on tightening the Fed’s balance sheet took traders by surprise. Positioning had been heavily skewed toward a weaker dollar and an accommodative Fed, but Warsh’s nomination triggered a sharp rebound in the greenback from multi-year lows, causing gold to plunge.

For much of January, gold had been treated as the ultimate hedge against fears of Fed policy “debasement” and rising trade tensions. However, with the prospect of a stronger dollar and a more aggressive Fed under Warsh’s leadership, the foundation for gold’s 29% rally is being tested. Traders who had embraced the triple-top breakout are now recalculating their positions as US 10-year yields remain firm near 4.24%.

The key question now is whether this is a temporary washout or a long-term trend reversal. With the NFP data set to dominate market sentiment, gold’s next moves will likely be shaped by how investors react to both the upcoming jobs report and the shifting expectations surrounding Fed policy.

Read more on how NFP and Fed changes are reshaping gold’s price outlook.