Gold Price Forecast: Impending Death Cross hints at more XAU/USD downside
- Gold is heading back toward seven-month lows near $3,950 early Thursday.
- The US Dollar enters bullish consolidation amid Fed rate hike bets, conflicting US-Iran messages.
- Gold could see further declines as RSI flirts with oversold territory, eyes on impending Death Cross.
Gold is nursing losses early Thursday, looking to retest seven-month lows near $3,950, following a failed recovery attempt above the $4,000 threshold.
Gold: More downside in store?
As analysed a week ago, Gold remains a lose-lose trade amid increased bets of at least two US Federal Reserve (Fed) interest rate hikes this year, with the first one as early as September.
Elevated inflation levels, combined with a surprisingly hawkish-sounding new Fed Chair, Kevin Warsh, have doubled down on Fed rate hike bets, bolstering the US Dollar (USD) uptrend while spelling doom for the non-yielding Gold.
The Greenback also remains underpinned by expectations of a stronger US economy and the persistent demand for safe havens, even amidst the US-Iran peace deal and Oil prices easing back to pre-Middle East war levels.
Markets continue to remain wary about the US-Iran peace deal, especially after conflicting messages from both sides on the Iranian nuclear program and the control over the Strait of Hormuz.
US President Donald Trump said Wednesday that Iran has assured that it is not imposing tolls, insurance fees or other charges on ships passing through the Strait of Hormuz, dismissing reports to the contrary as "fake news."
Meanwhile, the Iranian Islamic Revolutionary Guards Corps (IRGC) said on Thursday that “safe transit through the Strait of Hormuz is possible only via routes designated by Iran.”
Further, Reuters reported on Wednesday that Iran is set to propose charges related to security, navigation and environmental protection to transit through the Strait.
Earlier this week, Trump claimed that Iran has "fully and completely" agreed to the highest level of nuclear inspections long into the future. However, Iran’s President Masoud Pezeshkian clarified that “the discussion over our missiles does not exist in the MoU, and it never will.”
Beyond geopolitics, the focus today will remain on the US core Personal Consumption Expenditures (PCE), the Fed's preferred inflation measure, due for May. The inflation data will be closely scrutinized to reaffirm Fed rate hike bets, despite the recent pullback in Oil prices.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $3,969.55 with a firmly bearish near-term bias, as spot holds well beneath all its major simple moving averages (SMAs). The 21-day SMA at $4,279.88 is the first cap on any rebound, while the 50-day and 200-day SMAs clustered just above $4,470 keep the broader downtrend intact. The 100-day SMA, up at $4,690, marks a more distant dynamic barrier, and the Relative Strength Index (14) sitting around 29 suggests oversold conditions, hinting that some room for further downside as the broader tone remains negative.
Adding credence to the bearish potential, the 50-day SMA is on the verge of crossing the 200-day SMA from above, which if confirmed on a daily closing basis would validate a Death Cross.
On the topside, initial resistance is located at the 21-day SMA near $4,280, followed by a dense supply zone around the 200-day SMA at $4,474 and the 50-day SMA at $4,483. A sustained break above that cluster would be needed to ease bearish pressure and expose the 100-day SMA around $4,690 next. With no nearby moving-average supports on the daily chart, any interim floor is likely to be defined by price action and prior swing lows rather than indicators, leaving XAU/USD vulnerable to further downside until buyers can reclaim at least the $4,280 region.
(The technical analysis of this story was written with the help of an AI tool.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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.
