$4,200 remains a tough nut to crack for Gold bulls
- Gold keeps struggling under $4,200 despite a stronger-than-expected Chinese data dump.
- US Dollar finds dip-buyers, despite falling US yields and Oil prices, amid European civil unrest.
- The daily RSI remains bearish and the 21-day SMA continues to check Gold’s recovery.
Gold is struggling to sustain the renewed uptick, remaining below $4,200 in Monday’s Asian trades. The bright metal is torn between dip-buying in the US Dollar (USD) and renewed geopolitical optimism, which has sent Oil prices southward.
Gold lacks bullish conviction?
Despite fresh attempts to resume last week’s recovery from weekly troughs of $4,074, Gold seems to lack bullish conviction as the USD draws support from broad weakness in the Euro (EUR) amid civil unrest spreading across the European Union (EU).
On Saturday, France witnessed one of the most violent days of unrest in years, leaving public buildings burned, hundreds of shops destroyed and looted and at least 2,400 people arrested in cities across the country, per The Guardian.
The French protests spread to Lisbon, Portugal, and Milan, Italy, as tensions over housing and living costs intensify. Italy’s Prime Minister, Giorgia Meloni, said that while demonstrating was a right, “setting our cities ablaze is not”
However, falling US Treasury bond yields and Oil prices continue to pressure the Greenback, limiting its upside and thereby keeping Gold bulls hopeful.
After US Federal Reserve (Fed) Chairman Kevin Warsh’s silence on the central bank’s interest rate path, an October rate hike is almost priced out, which weighs negatively on the US Treasury bond yields across the curve, supporting the non-yielding bullion.
Warsh delivered a moderately constructive but cautious message, with a 5.6/10 FXS Speechtracker score that is slightly softer relative to the historical average of 6.1/10, underscoring a less forceful tone than usual. The acknowledgment of being “over-scarred” by the Global Financial Crisis highlights a persistent risk-averse bias even as Warsh emphasizes structural growth and an investment surge driven by “good policies,” suggesting no rush to pre-commit ahead of the October and December meetings. Warsh’s focus on AI as a near-term demand catalyst with uncertain employment effects, alongside plans for an AI field hearing and new Fed task forces, points to a central bank that sees technology as both a support for data-dependent policy and a potential source of new tail risks.
The retreat in Oil prices from monthly highs, after US President Donald Trump waived sanctions and tariffs on Russian energy to keep Moscow in Ukraine peace talks, eases inflation fears and Fed tightening expectations.
Trump’s waiver on Russian energy offset an Iranian report that a tanker exploded after hitting a naval mine in the Strait of Hormuz on Sunday.
Meanwhile, Ukrainian President Volodymyr Zelenskyy has become increasingly critical of Trump’s actions as the US has piled pressure on Ukraine to cease striking refineries in Russia and end the war quickly on Putin’s terms.
Gold is also holding ground following a slew of upbeat Chinese economic activity data. China’s Gross Domestic Product (GDP) rose to 4.5% year-over-year (YoY) in the third quarter from 4.3% prior, beating estimates for 4.4% growth.
The country’s annual Retail Sales and Industrial Production climbed 1.1% and 5.5%, respectively, in September, exceeding market expectations. Note that China is the world’s largest Gold consumer.
Against fresh optimism on the geopolitical front and strong Chinese data, Gold traders will likely pay close attention to the civil crisis in Europe and USD price action, as the US economic docket remains data-empty on Monday amid the Fed’s ‘blackout period’ before the October 27-28 monetary policy meeting.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,176.14, holding beneath a dense band of moving average resistance that keeps the near-term bias tilted lower. Spot is currently capped by the 21-day simple moving average (SMA) at roughly $4,191, with the 100-day SMA higher near $4,239 and the 50-day SMA even further overhead around $4,327, all reinforcing a corrective tone after the recent pullback. The 14-day Relative Strength Index at 46 sits just below the neutral 50 line, hinting at subdued bullish momentum and suggesting that rallies may struggle while price remains under these key averages.
On the downside, the next meaningful technical cushion emerges toward the prior rising trend-line break zone around $4,000, where buyers may attempt to rebuild a floor if selling pressure resumes. On the topside, initial resistance is seen at the 21-day SMA near $4,191, followed by the 100-day SMA at about $4,239; a daily close above these would be needed to ease immediate bearish pressure, while a sustained move through the 50-day SMA at $4,327 would start to undermine the current corrective phase, with the longer-term 200-day SMA higher up at $4,520 acting as a major cap for the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
