Gold Price Outlook: Gold Slides 7% as Key Factors Drive the Recent Sell-Off

Jakarta, Pintu News – On January 31, 2026, gold prices briefly traded at $4,975 per ounce, down more than 7% on the day after hitting a low of $4,941.79. Spot gold fell up to 7.5% during the trading session before recovering slightly, while US gold futures also fell more than 7%.

This sharp decline was due to the sudden strengthening of the US dollar, following President Donald Trump’s statement that he will announce the next Federal Reserve Chair nominee on Friday.

Uncertainty over Fed Chair shocks precious metals market

Markets reacted quickly after President Donald Trump confirmed his choice for Federal Reserve Chairman, with reports pointing to former Fed Governor Kevin Warsh as the strongest candidate. Trump told reporters that many believe Warsh should have held the position years ago.

Read also: Silver Price Forecast: XAG/USD Today, February 2, 2026

In his latest statement, Trump defended his decision not to nominate Kevin Hassett as Fed chairman, citing that he wanted to keep Hassett as his top economic advisor, while ultimately choosing Warsh to replace Jerome Powell.

Warsh, who lost to Powell in 2017, is known for supporting aggressive balance sheet reduction and being open to interest rate cuts. Analysts see Warsh as a market-friendly choice, and his nomination could ease concerns about the Federal Reserve losing its independence.

Strengthening dollar pressures gold prices

As speculation on the Fed Chair announcement intensified, the US dollar bounced back from four-year lows. A stronger dollar puts additional pressure on gold prices, as it makes gold more expensive for international buyers.

Analysts note that gold is increasingly being treated as a source of liquidity in times of market turmoil, rather than solely as a safe haven. The heavy selling of gold coincided with a broader decline in US stock indices, reinforcing the “risk-off” sentiment in the market.

Monthly Gains Remain Historically Strong

Despite Friday’s sharp drop, gold has still recorded a gain of around 16% throughout January. The precious metal surged to a record high of $5,594.82 on Thursday, marking its sixth consecutive monthly gain and the strongest monthly performance since 1999.

Goldman Sachs set a year-end price target of $5,400 for gold, citing increased individual investor participation. Gold’s sharp rise earlier this week came after the Federal Reserve kept interest rates on hold, and comments from Fed Chair Jerome Powell failed to halt the dollar’s earlier weakness.

Profit-taking drags down all precious metals

Sharp price reversals are not unique to gold. Silver prices fell more than 25% after setting a record of $121.64, wiping out $1.45 trillion in market value in just two days – one of the most volatile trading sessions in recent years.

Read also: Gold Buyback Price Today, February 2, 2026

Bloomberg analyst Mike McGlone notes that these extreme price movements increase the risk that 2026 could be a long-term peak in precious metals prices, particularly silver.

Meanwhile, UBS analyst Giovanni Staunovo described the decline as a consolidation phase after the big rally, but emphasized that there are still several factors supporting gold prices that remain strong.

Global Demand and Market Position

Physical demand indicators are showing mixed signals. Gold premiums in India rose to the highest level in more than a decade due to high investment demand ahead of a possible duty hike. In China, premiums also increased due to a surge in investment and jewelry demand.

Independent analyst Ross Norman expects gold prices may still fall in the short term, but still expects the average gold price to stay above $5,300 by 2026.

This sharp fall in gold prices shows how quickly market sentiment can change when policy uncertainty meets overcrowded market positions. With Trump’s decision on the Fed Chair, markets are now looking forward to more clarity on policy direction rather than simply relying on momentum.

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Reference:

• Coinpaper. Gold Price Prediction: Gold Falls 7% Under $5K Barrier. Accessed on February 2, 2026