Gold Price Forecast: 21-day SMA is yet again the level to beat for XAU/USD bulls
- Gold hesitates above $4,100 early Friday, eyeing a weekly loss.
- The US Dollar extends on less hawkish Fed Minutes, fresh US-Iran optimism and the USD/JPY slide.
- Gold’s daily technical setup still favors bears unless the 21-day SMA is recaptured on a sustained basis.
Gold is defending the $4,100 level early Friday, trying hard to capitalize on this week’s rebound from four-day lows of $4,022 even as tensions in the Middle East appear to have somewhat eased.
Gold to take cues from broader market sentiment
Despite the recent upswing, Gold remains on track to book a weekly loss, undermined by the revival of inflationary concerns following a renewed wave of hostilities between the United States (US) and Iran, which drove Oil prices to two-week highs.
However, the latest development on the Middle East front shows a US official stating that “the United States is still committed to finding a resolution, and technical talks continue,” easing tensions and diminishing the US Dollar (USD) safe-haven appeal.
The Greenback also bears the brunt of the fresh decline in the USD/JPY pair as the Japanese Yen (JPY) rallies hard after announcements of fiscal and financial reforms by the local authorities.
The latest leg down in the buck is allowing Gold to stay afloat heading toward data-light sessions ahead. Therefore, bullion traders will take cues from the broader market sentiment, while paying close attention to any US-Iran updates.
Markets could resort to repositioning their Gold trades before next Tuesday’s Consumer Price Index (CPI) data release from the US, which could provide fresh signals on the US Federal Reserve’s path forward on interest rates, particularly after Wednesday’s less hawkish Fed June meeting Minutes.
The Minutes showed that only "a few" participants saw the case for raising rates, while a majority of the policymakers did not see the immediate need to hike, even though they acknowledged elevated inflation due to the war's effect.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,127.06, extending a bearish bias as price holds below all major moving averages. The 21-day Simple Moving Average (SMA) at roughly $4,135.77 is the nearest cap, with the 50-day SMA around $4,353.07 and the longer-term 200-day and 100-day SMAs clustered above $4,490 and $4,590, respectively, reinforcing a broadly pressured structure. The Relative Strength Index (14) at 45.01 sits just below the midpoint, hinting at subdued downside momentum rather than an oversold extreme. Further, with the Death Cross in play, risks remain skewed to the downside for the bright metal.
On the topside, initial resistance is seen at the 21-day SMA near $4,135.77, with further barriers at the 50-day SMA around $4,353.07. Beyond that, the 200-day SMA at about $4,493.68 and the 100-day SMA near $4,593.41 form a wider supply band that would likely cap any stronger rebound while price trades below them. On the downside, the lack of nearby moving-average supports in the dataset leaves spot vulnerable to fresh lows, with traders likely to watch recent price floors and intraday pivots for the next meaningful demand zone.
(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.
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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.
