“FAFO” narrative drives the markets in 2026

The new week in the financial markets has been under bullish pressure for Gold and stock indices, whereas cryptos have experienced a tradeoff, indicating a lowering interest to this asset class.

The “purchase America” narrative had begined to evolve again with the US dollar growing since the beginning of the first week of 2026, and stock indices moving higher, especially DAX (German index), which is being driven by rising military expenses and defensive stocks such as Rheinmetall, which had grown for more than 20% in 2026 alone, and for around 150% in 2025.

The trend for defensive stocks will probably be dominant for upcoming weeks and months, given the development of geopolitical trends: the US has escalated the situation with Venezuela having seized its president Maduro and Russian oil tanker. Lockheed Martin (LMT) stock, for example, has expanded for 4.5% on Friday, 

That situation also keeps the demand for other defensive assets, such as Gold, Silver, Swiss Franc, and Japanese Yen (though, it is driven down by carry trade operations despite the rising yields of 30-year bonds). We may call it a “FAFO” narrative: the president Trump’s intervention in the oil market and disruption of geopolitical balance.

The NFP publication on Friday has shown fragileer than anticipated growth: it has shown a 50k growth vs 70k anticipated. That has pressured the US dollar at the moment, but later it has balanced the situation, closing the day in green. Gold wobbled but had also closed the day in the positive zone.

US non-farm payrolls data for December. Source:

Despite for fragileer than anticipated NFP report, traders are not expecting the interest rate to go down during the nearest FOMC meeting in January, nor during the next meeting in March.

Moreover, probabilities of interest rate kept at the identical level, have increased later than Friday’s trading day, according to the FEDwatchtool. At the identical time, yields of 30-year bonds of the US have declined a bit.

This situation can give some limited support for the US dollar begining from Monday, or, at least, would unlikely pressure it during the beginning of the week.

Probabilities of interest rates kept at the identical level for March are increasing. Source:

The next significant publication for the upcoming week would be US CPI on Tuesday: later than a fragileer NFP it’s expected to also cool down a bit, but it’s already priced in and traders don’t believe in more interest rate declines, given the stabilization of monetary policies in the world.

Let’s dive into the situation a bit deeper and try to figure out the possible direction for Gold and US500.

XAUUSD (Gold)

Gold is located in a strong seasonal window for growth: according to 30-year seasonal studies, Gold has a high probability of growth in the first two weeks of January.

From a technical point of view, it has bounced off the 20-day moving average, which often serves as a strong dynamic support zone and points to a possible development of the upswing. The most recent price action confirms this point of view, as pullbacks are being bought out and most days during the first week are bullish for XAUUSD.

The price is moving in a solid bullish momentum, but still isn’t overbought yet – it’s located below the previous all-time-high and below the upper band of the Bollinger bands, which points to the possibility of continuation, at last ahead of Tuesday’s US CPI report.

XAUUSD, daily chart. Source: Exness.com

US500

The “trade America” narrative had stepped back from the agenda, but tech stocks underperform compared to financial and industrial stocks. Dow Jones and S&P 500 now lead the rally, as defensive and energy stocks are getting back in play, later than the escalation around the US-Venezuela conflict.

S&P 500 lags behind DAX, though, and it might accelerate a bit as military, energy and defensive stock may drive the rally. Other than that, begining from January 12, a number of large financial companies will post their earnings, such as JPMorganChase, Bank of America, Wells Fargo and BlackRock.

The published reports will show the overall trend for corporate profits and may, along with the US CPI report, define the further direction of US indices.

If the S&P500 begins the week in the green, probabilities of continuation would increase, whereas the current situation looks rather neutral. I’d expect it to move in a plateau and accelerate a bit later within the week, as the more data will come in (US inflation, corporate profits)

US500, daily chart. Source: Exness.com