Gold Price Forecast: XAU/USD buyers refuse to give up yet as Middle East war widens
- Gold rebounds early Friday, as bargain-hunting persists with no end in sight for the Iran war.
- The US Dollar consolidates weekly gains amid safe-haven flows, ahead of US data.
- Technically, Gold retakes 21-day support-turned-resistance; RSI remains bullish.
Gold is up roughly 1% in Friday’s Asian hours, reversing the previous decline to near the $5,050 region. Buyers refuse to give up yet, as Gold continues to find a floor ahead of the US GDP revision and Personal Consumption Expenditures (PCE) Price Index release.
Gold eyes second weekly loss despite Iran crisis
Despite the latest recovery attempt, Gold remains on track to book the second weekly loss as a hawkish shift in the US Federal Reserve (Fed) monetary policy outlook counters the safe-haven appeal fuelled by the widening war in the Middle East.
With no end in sight for the Iran war, the recent Oil price surge continues to boost inflation expectations and raise economic growth concerns, underpinning the safe-haven demand for the US Dollar (USD) – the so-called world’s reserve currency.
Iran attacked several tankers and vessels in the Gulf waters while controlling the passage of commercial traffic through the Straight of Hormuz, the vital waterway for 20% of global oil supplies.
Iran’s new supreme leader, Mojtaba Khamenei, said in his first public statement since being appointed that the closure of the Strait of Hormuz maritime passage should be continued as a “tool to pressure the enemy,” CNBC reported on Thursday.
The Greenback also capitalizes on its re-emergent role as a petrocurrency. Meanwhile, higher inflation expectations prompt markets to potentially price out a Fed interest rate cut this year, further supporting the buck while weighing negatively on the yellow metal.
Later in the day, the Iran war headlines will continue to play a pivotal role in the Gold price action as markets take account of the 8% rise in Oil prices so far this week.
Gold could also be driven by the end-of-the-week flows and the repositioning trades ahead of next week’s Fed policy meeting.
Meanwhile, traders could ignore the US data flow as the Gross Domestic Product (GDP) data is a revision and the PCE inflation data is for January, which will likely have little relevance for the Fed.
Gold price technical analysis: Daily chart
The near-term bias is mildly bullish as price holds above the rising 21-day and 50-day Simple Moving Averages (SMAs), while the 100- and 200-day SMAs also trend higher, reinforcing a broader uptrend backdrop. The latest Relative Strength Index (RSI) reading near 52 stays above the midline and points to steady, rather than stretched, upside momentum.
Price has also pushed back above the 61.8% Fibonacci retracement at $5,141.05 measured from the $5,597.89 high to the $4,401.99 low, suggesting the recent pullback is stabilizing within a larger bullish structure.
Initial resistance is aligned with the 61.8% retracement at $5,141.05, and a sustained break higher would expose the psychological $5,200 area ahead of the $5,341.96 level at the 78.6% retracement. On the downside, immediate support emerges at the 21-day SMA around $5,120, followed by the 50-day SMA near $4,946, which protects the Fibonacci 50.0% retracement at $4,999.94. A deeper slide would then target the 38.2% retracement at $4,858.82, where failure would weaken the bullish bias and open the way toward the $4,684.22 level at the 23.6% retracement.
(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.
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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.
