Gold Price Forecast: XAU/USD feeling the heat as geopolitics is back in play
- Gold snaps recent recovery from six-week lows on Monday after facing rejection at $4,400.
- US Dollar stalls correction amid renewed geopolitical jitters, ahead of the Trump-Xi meeting.
- Gold’s daily technical setup paints a mixed picture, with a neutral daily RSI.
Gold is snapping the recent recovery from six-week lows near $4,235 at the start of the week on Monday, struggling below $4,400.
Gold: All eyes on geopolitics
Gold traders turn cautious as fresh geopolitical developments return to the fore, supporting the world’s reserve currency and safe-haven asset, the US Dollar (USD).
Over the weekend, tensions re-escalated between Ukraine and Russia after the former carried out a large-scale overnight drone and missile attack targeting Moscow and the surrounding region on Sunday, BBC reported.
Moscow Mayor Sergei Sobyanin confirmed that 450 of those drones hit the city's main oil refinery and a residential building.
Additionally, there are reports that Moscow could intensify drone, missile, sabotage, and cyber operations against NATO countries supporting Ukraine in the coming months. Therefore, European governments are stepping up military and civilian preparations for a possible escalation by Russia.
In the Middle East, tensions are on the rise as Trump tells Fox News he is considering ‘wiping Iran out’ after attacks on Riyadh by Houthi rebels. According to the Guardian, Yemen’s Houthis attacked “sensitive” sites in the Saudi capital Riyadh with missiles and drones.
Meanwhile, US Treasury bond yields are back in the green amid a hawkish US Federal Reserve (Fed) interest rate outlook, lifting the Greenback at the expense of non-yielding assets such as Gold.
Looking ahead, Gold looks vulnerable to further declines, though the downside could be limited due to retreating Oil prices, which ease inflation fears. “Oil prices slid to their lowest in more than a week on Monday on hopes diplomacy in the Iran war will get a chance this week amid a UN meet,” per Reuters.
Strategists at DBS highlight that oil prices are "easing a tad" after reports that China has requested Iran to help rein in Houthi attacks "on behalf of the Saudis." They add that Saudi Arabia is working to restore its East–West pipeline to the Red Sea coast after damage from recent attacks and "aims to return to half of its capacity," helping to alleviate some immediate supply concerns.
Markets also closely monitor the trade talks between the United States and China ahead of Thursday’s critical meeting between President Donald Trump and his Chinese counterpart Xi Jinping.
US Treasury Secretary Scott Bessent noted that he had a very successful engagement with China on trade and artificial intelligence (AI).
Markets remain on high alert for any forex intervention by Japanese authorities, which could significantly impact USD/JPY-led USD trades and eventually USD-sensitive Gold.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,364.10, holding a neutral near‑term tone as it consolidates between underlying moving‑average support and the distant 200‑day simple moving average (SMA) at $4,541.68 acting as overhead resistance. Spot gold remains above the 21‑day SMA at $4,419.15 and the clustered 50‑ and 100‑day SMAs around the low‑$4,300s, suggesting dips are still being cushioned, while the Relative Strength Index (RSI) near 50 underscores a lack of strong directional momentum.
On the topside, the 200‑day SMA at $4,541.68 is the next significant resistance that bulls would need to reclaim to reassert a broader uptrend. On the downside, immediate support is seen at the 21‑day SMA around $4,419, followed by the 100‑day SMA at roughly $4,319 and the 50‑day SMA near $4,296, with the rising trend‑line support coming in much lower around $4,002, where a break would signal a deeper corrective phase.
(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.
