Gold Price Forecast: XAU/USD awaits Bull Flag confirmation and central banks’ verdicts
- Gold price is ranging near $2,160 early Tuesday, awaiting key central banks’ decisions.
- US Dollar stands tall amid pre-BoJ and RBA verdict caution, despite weak US Treasury yields.
- Gold price is teasing a Bull Flag on the daily chart, as RSI turns bullish again.
Gold price is holding the previous rebounding in Asian trading on Tuesday, as buyers take a breather ahead of the upcoming key central banks’ policy decisions. The US Dollar (USD) is stretching higher amid a risk-averse market environment, shrugging off some weakness in the US Treasury bond yields.
Gold price looks to BoJ and RBA ahead of the Fed verdict
Gold price is looking to extend the week start’s upswing but a renewed US Dollar demand seems to be keeping the upside in check. Investors are flocking to safety in the US Dollar ahead of the key Bank of Japan (BoJ) and Reserve Bank of Australia (RBA) policy announcement.
The BoJ interest rate decision is likely to spike up the market volatility, as the central bank is widely expected to do away with its negative interest rate policy (NIRP) for the first time since 2016. Also, the central bank’s policy outlook will hold the key for the next direction in the USD/JPY pair.
In case, the BoJ announces an exit from its negative interest rate policy (NIRP), a USD/JPY collapse is likely to ensue, dragging the Greenback lower alongside. Gold price could subsequently benefit from the US Dollar decline. On a steady BoJ policy outcome, Gold price could come under fresh selling pressure due to the USD/JPY ‘rub-off effect’ on the US Dollar.
Meanwhile, the RBA is likely to maintain the interest rate at 4.35% for the third straight meeting on Tuesday, unlikely to have a big market impact, similar to that of the BoJ policy announcements.
However, any reaction to the BoJ and RBA policy announcements could prove temporary, as Gold traders will reposition themselves ahead of Wednesday’s critical US Federal Reserve (Fed) policy decision and the so-called Dot Plot Chart.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains more or less the same, with a Bull Flag confirmation awaited on daily candlestick closing above the falling trendline resistance at $2,164.
Acceptance above the latter will trigger a fresh upswing toward the $2,190 level, above which the record high at $2,195 will be retested. The next relevant bullish targets are seen at the $2,200 threshold and the $2,250 psychological level.
The 14-day Relative Strength Index (RSI) is sitting just beneath the overbought region, near 68.00, suggesting that a fresh Gold price upswing could be in the offing.
If Gold sellers fight back control, the immediate support is seen at the previous day’s low of $2,146, below which the falling trendline support at $2,130 will come to buyers’ rescue.
A sustained move below that level will put the March 6 low of $2,125 to the test. Further down, the key round level of $2,110 will challenge bullish commitments.
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.
