Gold Price Forecast: XAU/USD buyers hesitate amid holiday-thinned trading
- Gold trades volatile, but within range, as US, China holidays-led thin trading exaggerates moves.
- The US Dollar extends range play into the US GDP week, with markets pricing at least two Fed rate cuts this year.
- Technically, Gold tests key support at $5,000; daily RSI still remains bullish.
Gold is on the defensive but holds the $5,000 threshold in early trading on Monday. Market holidays in the United States (US) and China leave the bright metal trading listlessly, so far.
Gold lacks a clear direction amid light trading
Gold buyers seem to have taken a breather at the start of the week on Monday, following Friday’s solid return. Traders also take account of the latest US inflation and jobs data, while bracing for the US Gross Domestic Product for the fourth quarter of 2025.
The key US economic data will not be released until Friday and hence, China’s Lunar New Year holiday lull and sentiment surrounding the Fed and artificial intelligence (AI) concerns-driven rotation could continue to lead the way for the precious metal traders.
On Friday, the unexpected slowdown in the US Consumer Price Index (CPI) inflation data for January bolstered bets that the US Federal Reserve will deliver at least two interest rate cuts this year.
Futures imply a 68% chance the Fed will cut in June and have 62 basis points of easing priced in for the year, per Reuters.
The US Labor Department said that the CPI rose 0.2% last month after an unrevised 0.3% gain in December, falling short of the estimated increase of 0.3%. The headline annual inflation fell to 2.4% in January, against the forecast of 2.5%.
Excluding the volatile food and energy components, the CPI increased 0.3% after rising by an unrevised 0.2% in December, matching the market expectations.
US Treasury bond yields slipped on increased dovish Fed rate cut bets, smashing the US Dollar (USD) across the board, while lifting the USD-denominated Gold price.
Gold price technical analysis: Daily chart
The 21-day Simple Moving Average (SMA) climbs above the 50-, 100- and 200-day readings, underscoring a firm bullish alignment. All SMAs slope higher while price holds above them. The 21-day SMA at $4,973.78 offers immediate dynamic support. The 14-day Relative Strength Index stands at 54.62 (neutral), indicating momentum has normalized after the recent surge. Measured from the $5,597.89 high to the $4,401.99 low, the 50% retracement at $4,999.94 and the 61.8% retracement at $5,141.05 cap the recovery and would need to give way for an upside continuation.
The medium-term structure stays positive as the 50- and 100-day SMAs continue to rise above the 200-day one, and the price retains altitude over these baselines. Initial downside cushions emerge at the 50-day SMA at $4,644.95, while the 100-day SMA at $4,360.91 marks a deeper floor. A daily close above the immediate retracement barriers would open room for a continuation of the primary trend, whereas rejection near them would keep trade confined to the 21-day SMA-led range.
(The technical analysis of this story was written with the help of an AI tool.)
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.
