Gold Price Forecast: XAU/USD dip buyers emerge once again near $4,650
- Gold bounces off $4,650 demand area yet again amid broad risk aversion.
- The US Dollar retreats from ten-day highs as buyers take a breather after the recent uptrend.
- Technically, Gold’s bullish trend remains intact, with dip-buying a key trading strategy.
Gold buyers are fighting back control early Friday, after having found bargain buying interest once again near the $4,650 psychological level.
Gold suffers from rotation, buyers still hopeful
That being said, a sense of caution still prevails amongst them as volatility continues to remain high across the financial markets amid the ongoing rotation trend.
Markets continued to reposition their trades from overvalued assets such as tech stocks, Gold, Silver etc into value and undermined assets such as the US Dollar (USD).
Gold also suffered on Thursday as the dovish monetary policy announcements by the Bank of England (BoE) and the European Central Bank (ECB) sank the Pound Sterling and the Euro, respectively, bolstering the USD and smashing Gold.
But, the overall bullish potential for Gold remains well in place amid ongoing geopolitical tensions between the United States (US) and Iran.
Meanwhile, Russia, Ukraine and the US concluded a second round of peace talks in Abu Dhabi, agreeing on a major prisoner exchange but leaving key political and security issues unresolved.
This, combined with the uncertain US Federal Reserve (Fed) monetary policy outlook under the leadership of Fed Chair nomination Kevin Warsh, remains supportive of the non-yielding Gold.
On the data front, the delayed US JOLTS Job Openings Survey and Initial Jobless Claims only added to the unpredictability surrounding the Fed interest rate cuts this year, while lending some support to the bright metal.
Initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 231,000 for the week ended January 31, the Labor Department said on Thursday.
“The US December JOLTS report shows a steep drop-off in job openings to 6.54 mln from a downwardly revised 6.93 mln level in November,” according to ING Bank.
Traders are still pricing in two cuts for the year but the possibility of a move in June has inched up.
Later in the day, the preliminary University of Michigan’s (UoM) Consumer Sentiment and Inflation Expectations will provide some fresh trading impulse, with the end-of-the-week flows in play. Volatility is set to remain intense amid profit-taking and rotational trades.
Gold price technical analysis: Daily chart
The Simple Moving Averages (SMA) retain a bullish alignment, with the 21-day above the 50-, 100- and 200-day and all slopes rising. Price holds above the 50-, 100- and 200-day SMAs but sits just beneath the 21-day SMA, signaling a pause within the prevailing uptrend. The RSI (14) prints 51.82, neutral, reflecting momentum stabilization after prior overbought extremes. A reclaim of the 21-day SMA at $4,842.23 would reinstate topside traction, while the 50-day SMA at $4,545.27 underpins the pullback.
Trend indicators continue to support buyers as the 100- and 200-day SMAs extend higher, offering deeper support at $4,282.62 and $3,829.50 respectively. The RSI near the midline suggests consolidation could persist before the next directional push. A daily close above the 21-day SMA could extend the recovery within the broader bullish structure, whereas failure to regain it would keep price contained around the rising medium-term averages.
(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.
