Gold Price Forecast: XAU/USD eyes worst week in a month amid hawkish Fed outlook
- Gold extends the bounce from weekly lows of $4,244 early Friday, but stays below $4,300.
- US Dollar holds firm at three-month highs on global bond rout, hawkish Fed outlook.
- Technically, Gold appears vulnerable in the near term, while below key daily averages.
Gold is extending Thursday’s late rebound from the weekly low of $4,244 into Asia on Friday, but remains below $4,300. The bullion is headed for its worst week in four weeks amid a hawkish US Federal Reserve (Fed) outlook and deepening global bond rout.
Gold sees a profit-taking bounce; will it last?
Despite the potential weekly decline, Gold is attempting to regain $4,300 on its road to recovery amid profit-taking.
US Dollar (USD) bulls take a breather after the recent unstoppable run higher to three-month highs against its major currency rivals, allowing Gold some respite even as the US Treasury bond yields remain elevated at multi-year highs.
The global bond market sell-off worsened this week as benchmark 10-year and 30-year US Treasury yields approached 5.2% and 5.5% key levels, respectively, mainly driven by surging Oil prices-driven inflation fears.
Additionally, a hawkish Fed rate hike earlier this month, combined with the ongoing hawkish tone by Fed policymakers, continues to boost bets around at least one rate hike this year and a higher-for-longer rate hike view for next year. This narrative continues to provide legs to the uptrend in the USD alongside US Treasury bond yields, worsening the bond market rout.
Fed's Paulson delivered a distinctly hawkish message, with an FXS Speechtracker score of 8.1/10, notably above the 7/10 historical average, underscoring a stronger-than-usual tightening bias. The emphasis that the US central bank may need to raise interest rates again, that the September hike improved the inflation-fighting stance, and that underlying inflation remains "stubbornly high" despite a resilient economy and stable labor market, points to a clear willingness to back additional policy firming to restore inflation to 2%. The reference to AI buildout as a source of inflation pressures further reinforces the notion that demand-side and structural forces are still seen as potent enough to warrant a vigilant, potentially more restrictive Fed posture.
Meanwhile, Fed’s Hammack delivered a firmly hawkish message, with an FXS Speechtracker score of 7.4/10, only slightly softer relative to the historical average of 7.6/10. Emphasis that “price stability is the responsibility of central banks,” alongside warnings that inflation remains elevated amid solid demand, risks are tilted to the upside, and persistent supply shocks make it harder to return inflation to target, underscores a bias toward tighter policy for longer. The remark that the longer inflation stays high, the harder it is to bring it back to target reinforces a narrative supportive of the Dollar on any dips.
Furthermore, expectations that major global central banks, other than the Fed, will also maintain tighter monetary policies to combat inflation are exacerbating pain in bond markets worldwide, remaining a headwind for non-yielding assets such as Gold.
However, fresh diplomatic efforts to end the conflict in the Middle East, despite persisting tensions between Houthis and Saudi Arabia, appear to weigh on Oil prices early Friday, supporting Gold’s tepid recovery.
On Thursday, Iranian President Masoud Pezeshkian urged the United States (US) to choose whether it wants to end this war or not, by saying that “when we can resolve issues through dialog, we shouldn’t resort to killing one another. But with the instigations conducted by Israel, they have imposed this war on us. But we do not wish to continue.”
Meanwhile, US President Donald Trump and his Chinese counterpart Xi Jinping agreed on a way to coexist peacefully and act as partners rather than rivals after their highly anticipated meeting on Thursday.
Looking ahead, Gold could fade its recovery on resurgent USD demand and higher US Treasury bond yields unless Oil price extends its latest leg down.
Focus also remains on Middle East geopolitical developments and Fedspeak, as the week draws to an end, with attention turning to next week’s US Nonfarm Payrolls (NFP) release.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,285.95, maintaining a bearish near-term bias as spot remains capped beneath a dense layer of moving-average resistance. Price is below the 100-day simple moving average (SMA) at $4,304.64 and the 50-day SMA at $4,317.58, while the 21-day SMA at $4,356.32 and the 200-day SMA at $4,541.36 sit even higher, reinforcing the idea of a corrective phase within a broader uptrend. The Relative Strength Index (14) around 44.69 stays in neutral-to-soft territory, hinting that selling pressure is present but not yet exhausted.
On the topside, initial resistance appears at the 100-day SMA near $4,304.64, followed by the 50-day SMA at $4,317.58 and the descending trend-line break area around $4,337.85. Further up, the 21-day SMA at $4,356.32 precedes a more significant barrier at the prior high and downtrend origin near $4,519.20, with the 200-day SMA at $4,541.36 marking a major cap. On the downside, the current $4,285.95 region acts as a pivotal level, while a deeper slide would expose the rising trend-line support drawn from $3,990.07, where buyers would be expected to re-emerge to defend the broader bullish structure.
(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.
