Gold Price Forecast: Acceptance above $4,400 is critical for XAU/USD buyers
- Gold holds the previous recovery around $4,350 early Friday; buyers still cautious.
- US Dollar trades subdued amid retreating Oil prices and US Treasury bond yields.
- Gold settled Thursday above the 100-day SMA near $4,320, with a neutral daily RSI.
Gold is holding the recent recovery from six-week lows near $4,235 in Asia on Friday, struggling around $4,350 amid cautious markets.
Gold shifts to geopolitics, Oil prices post-Fed
Gold has capitalized recently on a pullback in Oil prices and US Treasury bond yields, which capped the US Dollar (USD), despite a hawkish US Federal Reserve (Fed) September monetary policy decision.
Oil prices are on a retreat from four-month highs amid hopes of alternate ways for oil supply from the Middle East to reach markets. Reuters reported on Thursday that Saudi Arabia is offering extra crude cargoes through Oman, reducing fears of supply disruptions.
Meanwhile, Bloomberg reported, citing a person familiar with the matter, that “Saudi Arabia is seeking to return about half the capacity of its cross-country oil pipeline within days after the link was halted last week following Houthi drone attacks”.
Easing Oil prices reduce inflation fears and keep US Treasury bond yields undermined across the board, while limiting the Greenback’s uptrend.
However, it remains to be seen whether the Oil price retreat sustains amid lingering concerns about strikes between Saudi Arabia and Iran-backed Yemen's militia, Houthis.
At the same time, the US-Iran standoff and renewed hostilities concerning the Strait of Hormuz could lend support to Oil prices, putting Gold’s recovery at risks.
According to Arab News, Iran's Islamic Revolutionary Guard Corps (IRGC) said on Thursday that a Togo-flagged oil tanker was struck while attempting to make an “illegal passage” through the Strait of Hormuz.
Additionally, a hawkish Fed’s Dot Plot and hawkish Chair Kevin Warsh also remain a headwind for Gold’s further recovery.
The Fed raised its benchmark interest rates by 25 basis points (bps) to 3.75%-4%, as widely expected, in a unanimous decision on Wednesday. The Fed’s Summary of Economic Projections (SEP), the so-called Dot Plot, pencilled in another rate hike this year.
Additionally, Fed Chair Kevin Warsh emphasized during his post-monetary policy meeting press conference that “the action will support a timelier return to its 2% inflation goal.”
Gold could also be impacted by the Bank of Japan’s (BoJ) policy announcements, which could rock the USD/JPY pair, having a ‘rub-off’ effect on the buck and the USD-sensitive bullion.
Also, end-of-the-week flows could remain in play for Gold traders as an eventful week draws to an end.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,353.63. The metal is pivoting in a neutral near-term tone, holding above the 50-day and 100-day simple moving averages (SMAs) at $4,288.30 and $4,320.62, which suggest underlying demand on dips, but still trading below the 21-day SMA at $4,429.40 and the longer-term 200-day SMA at $4,541.12 that cap the topside. The Relative Strength Index (14) stands near 49, hinting at balanced momentum after the recent pullback from record highs.
On the downside, initial support is seen close to the current area around $4,353.63, ahead of the 100-day SMA at $4,320.62 and the 50-day SMA at $4,288.30, where buyers are likely to defend the broader bullish structure. On the topside, immediate resistance emerges at the 21-day SMA at $4,429.40, with a more significant barrier at the 200-day SMA near $4,541.12; a daily close above the shorter average would open the way for a retest of the latter, while failure to clear $4,429.40 keeps XAU/USD confined in a consolidative range.
(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.
