Gold Forecast: Looks to snap four-month losing streak but sellers refuse to give up
- Gold fails to hold above $4,100 once again as sellers return early Friday.
- The US Dollar rebounds on fresh US-Iran tensions and month-end profit-taking.
- Gold closed above $4,100 on Thursday, but the daily RSI remains below 50.
Gold is seeing a brief pullback from weekly highs of $4,120 early Friday, but remains on track to end its four-month losing streak.
Gold sellers return as USD finds haven demand
Gold is failing to resist above the $4,100 level, despite closing above it on Thursday, as the US Dollar (USD) stages a solid rebound from six-week lows against its six major currency rivals.
Even though mediator Pakistan insisted that negotiations between Tehran and Washington are ongoing, the US’s “heavy” strikes on Iran in retaliation for fresh attacks targeting American forces in Jordan revive the haven demand for the Greenback.
In response, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said in an X post that “Americans have grown accustomed to making up for the slaps they receive on the battlefield by spilling the blood of the innocent. They will pay the price.”
The USD also draws support from persistent hopes that the US Federal Reserve (Fed) will opt for interest rate hikes later this year, despite Chair Kevin Warsh’s noncommittal stance on further tightening during the post-policy-meeting press conference on Wednesday.
Fed pause underscores debate as HSBC stays neutral on duration and backs the Dollar
Analysts at HSBC highlight that the US Fed Reserve left interest rates unchanged for a fifth consecutive meeting, “in line with expectations,” but stress that the “9-3 vote revealed a lively debate within the FOMC.” In fixed income, they note that “we maintain a neutral duration stance and favour high-quality investment grade credit to capture attractive yields and coupon income.” HSBC adds that they “remain positive on the US dollar, supported by resilient US economic fundamentals and relatively attractive interest rate differentials.”
Beyond the USD comeback, Gold also bears the brunt from disappointing Chinese official business PMI data for July, while traders turn cautious ahead of the Bank of Japan (BoJ) monetary policy decision.
Financial markets experienced intense volatility in early American trading hours on Thursday amid a suspected Japanese forex intervention that sent the Japanese Yen (JPY) skyrocketing and the USD/JPY pair down roughly 600 pips in a matter of minutes.
The USD/JPY slump battered the Greenback across the board, briefly allowing Gold to regain the $4,100 threshold.
Further, mixed US Gross Domestic Product (GDP) and Jobless Claims data added to the weight on the USD, lending additional support to the bright metal.
Looking ahead, Gold could see a tailwind on a potential hawkish hold decision by the BoJ, which could revive JPY buyers and smash USD alongside. However, if Middle East hostilities intensify, Gold will likely feel the pain from the increased haven demand for the US Dollar.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,082.83, keeping a bearish near-term bias as spot remains below the major simple moving averages. The 50-day simple moving average (SMA) at $4,185.76, together with the 100-day SMA at $4,426.31 and the 200-day SMA at $4,490.85, all sit overhead and suggest that rallies are still capped within a broader corrective phase, while the 21-day SMA at $4,073.95 offers nearby dynamic support. The Relative Strength Index (14) around 48.3 is slightly below the midline, hinting at subdued momentum and reinforcing the notion of consolidation within a broader downside context.
On the topside, initial resistance emerges at the 50-day SMA near $4,185.76, and a daily close above this barrier would be needed to ease immediate bearish pressure and open the way toward the 100-day SMA at $4,426.31 and then the 200-day SMA at $4,490.85. On the downside, the first support is aligned with the 21-day SMA at $4,073.95; a sustained break beneath this level would expose lower levels and suggest that sellers are regaining control of the daily structure.
(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.
