Gold (XAU/USD) slides to a fresh three-week low below $4,550 during early European trading on Monday, pressured by renewed profit-taking. The precious metal remains on the back foot after hitting record highs last week, as improving political stability in the United States eases demand for safe havens. Confidence rose after Kevin Warsh was named the next Federal Reserve Chair, helping to calm concerns over the central bank’s independence.
That said, persistent geopolitical risks—particularly tensions between the US and Iran—may continue to lend some underlying support to traditional safe-haven assets like gold. Investors will keep a close eye on developments in US-Iran negotiations, alongside clearer signals on Warsh’s future policy stance. In addition, steady buying from major central banks could help limit deeper downside in the metal.
Later on Monday, attention turns to the US ISM Manufacturing PMI. The index is expected to edge up to 48.3 in January from 47.9 previously. A weaker-than-expected reading could weigh on the US Dollar (USD) and provide some relief to USD-denominated gold, as a softer greenback typically boosts demand from overseas buyers.
Daily Digest Market Movers: Gold stays under pressure after sharp pullback
Over the weekend, US President Donald Trump said the US will “hopefully” reach a deal with Iran. At the same time, Iran’s Supreme Leader Ayatollah Ali Khamenei warned that any attack on Iran could trigger a broader regional conflict, as the US continues to reinforce its military presence in the area.
“Investors and global central banks have increasingly favored gold as a reserve asset, viewing it as protection from US policy dependence,” said Emma Wall, Chief Investment Strategist at Hargreaves Lansdown. She added that the freezing of Russia’s US-dollar assets by countries backing Ukraine has prompted some nations to see gold as a more neutral and attractive reserve.
Trump has nominated Kevin Warsh to replace Jerome Powell as Fed Chair, with Warsh set to assume the role in May 2026.
Meanwhile, US inflation data remains firm. The Producer Price Index (PPI) rose 3.0% year-on-year in December, beating expectations of 2.7%, according to data released Friday. On a monthly basis, PPI increased 0.5%, well above both forecasts and the prior 0.2% reading.
Stronger-than-expected producer inflation reinforces the case for the Fed to keep interest rates unchanged as policymakers assess the inflation outlook. Markets are currently pricing in nearly an 87% probability that rates will remain in the 3.50%–3.75% range, with the first 25-basis-point cut now expected around June.
