Gold rebounded above $4,900 an ounce in thin holiday trading, as dip-buyers returned after a sharp two-day slide and investors repositioned ahead of the Federal Reserve’s latest meeting minutes. The recovery comes at a delicate moment for global markets, where expectations around U.S. interest rates, currency strength, and geopolitical risks continue to dictate capital flows across asset classes.

The bounce suggests that while volatility has intensified, the structural narrative supporting bullion remains intact — at least for now.

Volatility After an Overheated Rally

Spot gold climbed as much as 1.3% on Wednesday, reversing part of the more than 3% decline seen over the prior two sessions. The earlier drop coincided with a stronger U.S. dollar, as a key gauge of the currency rose up to 0.4% before easing.

The recent turbulence follows a historic surge that propelled gold to an all-time high above $5,595 an ounce in late January. That rally, driven by speculative momentum and geopolitical uncertainty, quickly became stretched. In just two sessions, prices plunged close to $4,400 — one of the most dramatic pullbacks in over a decade.

Although bullion has since recovered nearly half of those losses, price action has remained choppy. Liquidity has been thinner than usual this week, with much of Asia closed for the Lunar New Year, amplifying intraday swings and exaggerating short-term sentiment shifts.

Monetary Policy in Focus

Attention now turns squarely to U.S. monetary policy. Investors are awaiting the release of minutes from the Federal Reserve’s January meeting, where policymakers opted to keep interest rates unchanged.

Comments from Fed officials have offered mixed signals. Governor Michael Barr indicated rates should remain steady “for some time” until clearer evidence emerges that inflation is moving sustainably toward the 2% target. Meanwhile, Chicago Fed President Austan Goolsbee suggested there could be room for further cuts later this year if inflation continues to cool.

For gold, the path of rates is critical. As a non-yielding asset, bullion typically benefits when real interest rates fall or when expectations for rate cuts strengthen. Indeed, last week’s modest inflation data briefly fueled hopes for easing, providing a short-lived tailwind for precious metals.

Markets are now recalibrating the probability and timing of any policy shift — a process that could either stabilize gold’s consolidation phase or trigger another leg higher.

Structural Drivers Remain Intact

Despite recent volatility, major banks including BNP Paribas, Deutsche Bank, and Goldman Sachs continue to forecast renewed upside for gold. Analysts argue that the broader macro backdrop still favors safe-haven assets.

Heightened geopolitical tensions, questions over the Federal Reserve’s independence, and a gradual shift away from sovereign bonds and traditional reserve currencies remain supportive themes. In addition, central bank buying and strong retail demand in Asia have provided a persistent floor beneath the market in recent months.

Silver, often seen as both a precious and industrial metal, rose 2.6% to $75.45 an ounce, while platinum and palladium also advanced. The Bloomberg Dollar Spot Index was modestly higher, underscoring the delicate balance between currency movements and commodity pricing.

What Investors Should Watch Next

The immediate catalyst will be the tone of the Fed minutes and subsequent commentary from policymakers. Any signal that rate cuts are closer than previously assumed could reignite bullish momentum. Conversely, a firmer stance on maintaining restrictive policy may keep gold range-bound.

Beyond monetary policy, liquidity conditions, ETF flows, and demand from China following the holiday period will be key indicators of whether this rebound marks a sustainable reset or merely a pause in a broader consolidation phase.

In a market that has swung from euphoria to correction within weeks, gold’s resilience above the $4,900 level may prove to be an important psychological anchor for both institutional and retail investors navigating an increasingly uncertain macro landscape.