Gold falls under pressure, but geopolitics and uncertainty support the price above $5,050.

Gold prices showed pressure on Thursday in Asian trading but did not decline further. The precious metal remains around $5,060 and maintains a robust price level despite unexpectedly strong US employment data. Market observers interpret this resilience as a clear sign that safety-oriented investors view current geopolitical uncertainties as more significant than the bullish economic signals.

Why Gold is Falling but Not Collapsing: The Geopolitical Support

Ongoing tensions between the US and Iran currently underpin gold price stability. President Donald Trump signaled after his meeting with Israeli Prime Minister Benjamin Netanyahu that he advocates for continuing nuclear negotiations with Tehran. At the same time, Trump threatened measures if a new agreement is not reached. This confrontational rhetoric keeps the so-called risk premium in the gold market elevated, preventing a sharper price decline despite fundamental factors that should be negative. In such phases, gold is traditionally in demand as a substitute for bonds and as a protection against geopolitical shocks.

Labor Market Surprises on the Upside – a Potentially Problematic Signal

The US labor market data should have exerted significant downward pressure on gold prices. According to the Bureau of Labor Statistics (BLS), non-farm employment grew by 130,000 jobs in January. This figure surprised analysts considerably, who had expected only about 70,000 new jobs on average. Compared to the upwardly revised December figure of 48,000, this represents a notable improvement. Meanwhile, the unemployment rate fell from 4.4% in December to 4.3% – also a positive surprise, as consensus had expected stagnation. Such a robust labor market picture would normally strengthen the US dollar and put downward pressure on gold priced in that currency.

Fed Official Warns to Exercise Caution: Tight Monetary Policy Remains a Topic

Jeff Schmid, President of the Kansas City Federal Reserve Bank, offered more nuanced considerations. On Wednesday, Schmid emphasized that the Fed must keep monetary policy restrictive to sustainably combat inflation trends. He sees little evidence in current economic data of an already effective brake – a stance that contradicts immediate expectations of rate cuts. This moderate position can partly support gold prices, as higher real interest rates are still anticipated.

Friday’s CPI Data Could Set a New Direction

Market focus will now turn to the US Consumer Price Index (CPI) data due on Friday. Economists expect both headline and core inflation to have risen by 2.5% year-over-year in January. If the data confirm a moderation in price pressures, it could fuel speculation about rate cuts around mid-year – a scenario that would typically boost the interest-free commodity gold. Conversely, inflation figures above expectations would force the Federal Reserve to prolong its restrictive monetary policy, causing gold to decline and limiting upward momentum. Investors should closely watch this critical data release, as it will be decisive for both immediate gold price movements and medium-term interest rate expectations.