Gold Price Forecast: What’s next for XAU/USD after the recent sell-off?
- Gold rebounds from critical support line early Friday, as profit-taking creeps in following a down week.
- The US Dollar stalls Thursday’s steep slide after hawkish central bank decisions worldwide.
- Gold defended the critical 100-day SMA at $4,605 on Thursday, but bearish bias still prevails.
Gold is replicating the recovery moves seen in Thursday’s Asian trades, as buyers jump back in at lower levels early Friday after defending the critical $4,600 demand area.
Gold: Not out of the woods yet as Iran war escalates
Gold is reversing a small portion of the roughly 7% loss incurred so far this week, as sellers take a breather before the next push lower.
The bright metal accelerated declines on Thursday, even though the US Dollar (USD) succumbed to the heavy selling pressure induced by impressive gains in the Euro (EUR) and the Japanese Yen (JPY), following their respective monetary policy decision.
After the US Federal Reserve (Fed) held the key policy rate steady on Wednesday, the Bank of Japan (BoJ), the Bank of England (BoE), and the European Central Bank (ECB) also followed suit, signalling caution amid risks of energy-driven inflation shock as the Middle East conflict intensifies.
Investors remained wary over no end in sight to the war, especially after Israel targeted Iran’s energy infrastructure in the Gulf region and Iran retaliated with force to those attacks. Gold was heavily sold to cover losses elsewhere as risk aversion remained at full steam.
Markets also began pricing out interest rate cuts by the world’s major central banks this year, adding to the negative risk sentiment around non-yielding assets such as Gold.
In Friday’s trading ahead, Gold could build on its recovery mode from six-week troughs of $4,503 as traders will likely unwind their short positions heading into the weekend and before next week’s global business PMI data.
The end-of-the-week flows will also influence the Gold price action as a blockbuster central bank week draws to an end and the Middle East turmoil drags on.
Gold price technical analysis: Daily chart
The near-term bias is neutral with a mild bearish tilt as price has slipped below the 21-day Simple Moving Average (SMA) near $5,080 and the 50-day SMA around $4,980, breaking the prior short-term upward structure while still holding well above the rising 100- and 200-day SMAs, which anchor a broader uptrend. The 21-day SMA has started to roll over while price accelerates away from it on the downside, indicating fading upside momentum. The Relative Strength Index (RSI) at 35.66 stays below the 50 midline but above oversold territory, reinforcing a corrective, rather than impulsive, downside phase within a longer-term bullish context.
Immediate resistance emerges at the 50-day SMA around $4,980, with the 21-day SMA near $5,080 as the next upside hurdle if buyers attempt a rebound. A daily close back above this zone would improve the short-term outlook and expose the recent highs near $5,330. On the downside, initial support sits at the recent swing low close to $4,650, with a break below this level opening the way toward the rising 100-day SMA now near $4,610. As long as price holds above the 100-day and 200-day SMAs cluster, the broader bullish structure stays intact despite current downside pressure.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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.
