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Gold Price Forecast: XAU/USD buyers face rejection at $3,400 yet again; what next?

  • Gold hits two-week highs at $3,400, then turns south toward Wednesday’s low near $3,375.
  • The US Dollar downside extends amid a slightly upbeat mood, ahead of US data flow.
  • Technically, acceptance above $3,400 is critical for a sustained uptrend, with RSI still bullish.

Gold is replicating the retracement moves seen in Wednesday’s Asian trades, after having faced rejection once again at the $3,400 threshold.

Gold to derive support from tariff and Fed concerns

Gold buyers are taking a breather early Thursday, bracing for a slew of mid-tier US economic data releases, including the US second-quarter Gross Domestic Product (GDP) revision, Jobless Claims and Pending Home Sales, for fresh hints on whether the US Federal Reserve (Fed) will lower interest rates further beyond the September policy meeting.

The CME Group’s Fed Watch Tool shows roughly 90% odds of a September Fed rate cut, especially after Wednesday’s dovish commentary from New York Fed President John Williams.

Williams noted that “it is likely interest rates can fall at some point but policymakers will need to see what upcoming data indicate about the economy to decide if it's appropriate to make a cut next month,” per Reuters.

Gold staged a solid rebound on Wednesday, following his comments, further deriving support from the ongoing drama between US President Donald Trump and Fed Governor Lisa Cook.

Citing sources, CNBC News reported that Fed Governor Lisa Cook's lawsuit against US President Trump's effort to fire her could be filed soon.

Trump’s continued attacks on the Fed’s autonomy and dovish Fed expectations will likely keep any downside limited in Gold going forward.

Additionally, a simmering global trade war could also keep the haven demand for Gold intact. Mexico and Canada plan to increase tariffs on China, while India faces 50% tariffs from the US over its Russian oil purchases.

US-Japan trade talks are at a standstill after the Japanese trade negotiator cancelled his visit to Washington due to administrative issues.

Gold price technical analysis: Daily chart

The short-term technical outlook for Gold remains upbeat as long as the 14-day Relative Strength Index (RSI) stays above the 50 level. The leading indicator is currently flatlined near 57.00

Buyers also stay hopeful as a Bull Cross remains in play. The 21-day Simple Moving Average (SMA) closed above the 50-day SMA on Monday, confirming the bullish crossover.

The immediate topside hurdle is seen in the $3,400 area, above which the static resistance at around $3,440 will be back in play.

To the downside, sellers will test the 21-day SMA at $3,359, below which the 50-day SMA at $3,348 could act as a tough nut to crack.

The next solid support is located at the 100-day SMA at $3,328. Only a sustained move below the latter will negate any positive bias in the medium term.

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

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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