Gold Price Forecast: XAU/USD buyers try their luck on Mideast respite, Oil slump
- Gold opens the week gap up and retakes $4,100 on Monday as US-Iran pause strikes, inflation fears ease alongside Oil prices.
- The US Dollar extends correction from two-month highs as Fed rate hike bets recede.
- Gold sellers remain hopeful as the daily technical setup holds bearish.
Gold is off the highs but holds its bullish opening gap, while struggling near $4,100 early Monday. Despite the recent rebound, buyers trade with caution, keeping a close eye on the Middle East developments ahead of the US Federal Reserve (Fed) policy verdict this week.
Gold cheers guarded optimism
Gold kicks off the week on a positive note, extending the previous week’s rebound from near the $4,025 region.
In doing so, the bright metal rose over 1% to regain the $4,100 level briefly. The latest leg up was sponsored by reduced haven demand for the US Dollar (USD) across the board and a fall in US Treasury bond yields.
This follows a two-night pause in strikes being exchanged between the United States (US) and Iran, which offered some respite to the markets, driving Oil prices 5% lower and thus easing inflation fears.
Additionally, Iranian Foreign Ministry spokesperson Esmail Baghaei told a press conference on Sunday that “mediators are working and trying to prevent tension from escalating.”
Receding inflation fears temper bets on a Fed interest rate hike, weighing on the Greenback and US Treasury bond yields, while allowing Gold buyers to try their luck.
However, Gold buyers have turned cautious as they assess whether the lull in fighting, which began on Friday evening and follows nearly two weeks of strikes, could last amid ongoing diplomatic efforts.
Gold traders also refrain from creating any big positions in the metal ahead of the Fed monetary policy meeting due to begin on Tuesday, with the verdict set to be announced on Wednesday.
Markets are pricing in roughly a 33% chance of a Fed rate hike this week, up from 12% seen 10 days ago, according to the CME Group’s FedWatch Tool.
Meanwhile, Gold’s daily technical setup also continues to caution Gold optimists, following the confirmation of the Bear Cross while momentum stays negative.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,090.11. The metal holds just above the 21-day simple moving average (SMA) at $4,069.60, but remains capped by the 50-day SMA near $4,221.95, keeping the broader tone bearish as price trades beneath the medium- and long-term trend gauges. The 100-day and 200-day SMAs, clustered around $4,469.47 and $4,493.66, reinforce a heavy topside structure, while the Relative Strength Index (14) around 48 hints at consolidative, slightly negative momentum rather than a decisive recovery.
Additionally, keeping buyers defensive, the 100-day SMA has closed below the 200-day SMA on July 22, confirming a Bear Cross.
On the downside, immediate support is located at the 21-day SMA at $4,069.60; a clear break below this short-term base would expose deeper weakness toward prior psychological and structural levels not shown on this chart. On the topside, initial resistance comes at the 50-day SMA around $4,221.95, with the 100-day SMA at $4,469.47 followed by the 200-day SMA at $4,493.66 forming a dense resistance zone that would need to be reclaimed to alleviate the prevailing bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
