Gold Price Forecast: XAU/USD looks vulnerable amid inflation fears, hawkish Fed hold
- Gold stalls its bounce from monthly lows of $4,510 early Thursday, as buyers lack conviction.
- The US Dollar regains traction on the Fed’s hawkish hold, US-Iran tensions-led surging Oil prices.
- Technically, Gold remains a ‘sell on rise’ trade amid bearish daily RSI.
Gold is fading its bounce from monthly lows of $4,510 set on Wednesday, as buyers lack conviction amid renewed haven demand for the US Dollar (USD)
Gold consolidates before the next push lower
The US-Iran tensions, concerning the Strait of Hormuz, show no signs of easing, fuelling the unstoppable rally in Oil prices, which re-ignite inflation concerns and sag investors’ confidence.
The risk-averse market continues to bode well for the world’s reserve currency, the Greenback, while remaining a drag on the USD-sensitive Gold.
Bloomberg reported on Wednesday, citing US President Donald Trump, noting that the United States (US) will continue its naval blockade of Iran until a deal is secured with Tehran to address the country’s nuclear program.
In response, Iran warned of "unprecedented military action" against continued US blockading of Iran-linked vessels.
Further, there are reports that the US Central Command (CentCom) is preparing a plan for brief and intense strikes on Iran, likely hitting infrastructure.
Clearly, Gold faces a double whammy, with another hit coming from the US Federal Reserve’s (Fed) hawkish hold decision on Wednesday.
The Fed held interest rates steady, as widely expected, “but in its most divided decision since 1992, noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the US central bank should communicate a bias towards lowering borrowing costs,” per Reuters.
The hawkish dissent on communication prompts traders to price out Fed rate cuts this year. Markets are now expecting a 30% chance of a hike by March 2027, sharply up from roughly 5% a day prior, the CME Group’s FedWatch Tool shows.
Looking ahead, Gold will likely stick to its downside consolidative mode as the economic calendar is a busy one, with the Bank of England (BoE) and European Central Bank (ECB) policy decisions lined up, followed by the US first-quarter advance Gross Domestic Product (GDP) and PCE inflation data.
US-Iran headlines and Oil price action will continue influencing the bright metal this Thursday.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,553.25. The metal holds below the short- and medium-term simple moving averages (the 21-day SMA at $4,718.10 and the 50-day SMA near $4,840.11), keeping the near-term bias tilted lower despite price still hovering above the longer-term 200-day SMA around $4,274.87. A downward resistance trend line, with a recent reaction zone near $4,670.81, continues to cap bounces, while the Relative Strength Index around 38 suggests weak, consolidative momentum rather than a decisive recovery.
On the topside, initial resistance is seen at the descending trend line near $4,670.81, followed by the 21-day SMA around $4,718 and then the 100-day SMA close to $4,757, with the 50-day SMA near $4,840 acting as a broader cap while price remains below it. On the downside, immediate support is traced to the recent closing area around $4,553, with the rising support trend line coming in near $4,382 and the 200-day SMA near $4,275 providing a deeper structural floor if selling pressure extends.
(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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
