Gold Price Forecast: $4,250 remains a tough nut to crack for XAU/USD buyers

Gold builds on the recent upside and tests $4,250 as the Fed decision came out less hawkish than feared.
US Dollar licks its wounds alongside US Treasury yields as focus now shifts to next week’s Nonfarm Payrolls data
Gold yearns for acceptance above $4,250 for a sustained uptrend as technicals remain bullish.

Dhwani Mehta FXStreet

Gold is testing bearish commitments at the $4,250 psychological level on Thursday, pausing a two-day uptrend as markets weigh a less hawkish than feared US Federal Reserve (Fed) policy announcements.

Gold awaits US jobs data after the Fed verdict

Gold extended its overnight advance into early Asian trading on Thursday before witnessing a profit-taking pullback as sellers jumped in once again at the $4,250 level.

Non-yielding assets such as Gold built on its recent bullish momentum after the Fed delivered on the expected 25 basis points (bps) interest rate cut to 3.5%-3.75% on Wednesday.

Despite the widely anticipated rate cut, the US Dollar was slammed across the board alongside the US Treasury bond yields as Fed Chairman Jerome Powell at his post-meeting press conference stuck to a cautious tone, disappointing those who had been positioned for a more hawkish one.

Markets continued to price in two more rate cuts next year, against the Fed's median expectation for a single quarter-percentage-point cut next year, powering Gold at the expense of the Greenback.

Traders picked up on the Fed’s concerns over a slowing labor market, lending further support to the bright metal.

Now, with the critical Fed event risk out of the way, the focus turns toward the US employment data, with the Jobless Claims eagerly wait for fresh insights on the state of the labor market ahead of next week’s delayed Nonfarm Payrolls releases.

Gold price technical analysis: Daily chart

In the daily chart, XAU/USD trades at $4,225.19. The 21-, 50-, 100- and 200-day Simple Moving Averages (SMAs) climb in bullish alignment, with the shorter ones above the longer ones. Price holds above all these references, reinforcing buyers’ control. The Relative Strength Index (14) prints at 61.83, positive and shy of overbought. Measured from the $4,381.17 high to the $3,885.84 low, the 61.8% retracement at $4,191.95 has been reclaimed, while the 78.6% retracement at $4,275.16 caps the topside.

On dips, the 21-day SMA at $4,157.88 offers initial support, with the 50-day at $4,105.76 cushioning deeper pullbacks. Momentum stays firm while the RSI holds above 50; a loss of the 21-day average could slow the rally and send price toward the 50-day SMA.

(The technical analysis of this story was written with the help of an AI tool)

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

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