Gold bounced back sharply on Wednesday, climbing 2.64 percent to trade at approximately 4,987 US dollars per ounce as investors returned to the precious metal following a two-session pullback, with the rebound fuelled by cautious Federal Reserve (Fed) commentary and anticipation of key United States economic data due later this week.
The metal is trading just below the psychologically important 5,000 US dollar threshold, with markets now focused on the release of the Federal Open Market Committee (FOMC) minutes Wednesday evening, followed by United States GDP data and manufacturing and services Purchasing Managers’ Index (PMI) figures on Thursday and Friday.
Wednesday’s recovery followed two days of selling pressure triggered partly by a stronger US dollar and some unwinding of positions from Asian trading participants. The Chinese Lunar New Year holiday reduced participation from one of the world’s largest sources of physical gold demand, temporarily thinning market liquidity and limiting further upside pressure on prices.
Fed commentary kept traders cautious rather than bullish. Fed Governor Michael Barr indicated that rates are likely to remain on hold for some time until inflation moves sustainably toward the 2 percent target, while Chicago Fed President Austan Goolsbee left the door open to further rate cuts later in 2026 if inflation data continues improving. Markets are currently pricing a 92.1 percent probability that the Fed holds rates at 3.50 to 3.75 percent at its March meeting, with any cut seen as unlikely before mid-year.
Structural demand is providing a floor under prices even as short-term sentiment shifts. China’s central bank, the People’s Bank of China (PBoC), extended its gold purchases for a fifteenth consecutive month in January, while geopolitical risks including US-Iran tensions and the Russia-Ukraine negotiations continue to underpin safe-haven demand.
Gold prices have risen more than 25 percent since the start of 2025, fuelled by inflation concerns, sovereign debt pressures and broad uncertainty over the Fed’s policy trajectory under its evolving leadership. The rally has, however, come at a consumer cost, with the World Gold Council (WGC) reporting that global jewellery demand fell 18 percent in 2025 as elevated prices priced out discretionary buyers, with China recording a particularly sharp 24 percent decline.
The metal’s next directional move is expected to hinge on whether the FOMC minutes confirm a data-dependent pause or hint at resumed easing, and whether Thursday’s GDP reading confirms the slowdown in consumer spending suggested by recent retail sales data.
