Gold Price Forecast: XAU/USD loses steam, battles around $4,200

XAU/USD Current price: $4,207.20

• The United States government ended the longest shutdown on record.
• Wall Street suffers after flirting with record highs, underpinning Gold.
• XAU/USD loses upward momentum, risk remains skewed to the upside.

Gold price peaked on Thursday at $4,245 a troy ounce, a fresh three-week high, but it trimmed part of its intraday gains and currently hovers around $4,200. The XAU/USD pair surged throughout the first half of the day, amid the US Dollar (USD) edging sharply lower on the back of headlines indicating that the United States (US) government had resumed its activities after passing a funding bill that will cover the period until January 30.

Optimism eased during European trading hours, pushing XAU/USD below the $4,200 mark. However, the soft tone of Wall Street, hinting at fresh market concerns, helped the bright metal recover some ground.

US indexes turned south with the Dow Jones Industrial Average retreating from fresh record highs, down roughly 400 points at the time of writing. The heavy tech-weighted Nasdaq Composite is the worst performer, down 1.76% amid weakness among tech shares, amid worries about those being overvalued.

Other than that, market participants are concerned about the upcoming flood of US economic data after a forty-three-day silence, and the potential impact of such figures on the December Federal Reserve (Fed) monetary policy decision. Odds for a December interest rate cut fell after Chair Jerome Powell noted that the movement should not be taken for granted, following the October meeting. According to the CME FedWatch Tool, the odds for a December cut stand at 53.6%, while those for a no-change outcome account for 46.4%.

XAU/USD short-term technical outlook

Technical Analysis:

The XAU/USD pair trades at $4,207.20, and the 4-hour chart shows fading upward strength, although a well-limited downward scope. The 20-period Simple Moving Average (SMA) stands at $4,164, providing dynamic support as it rises above the 100- and 200-period SMAs, with all three indicators sloping higher, in line with the dominant bullish trend. At the same time, the Momentum indicator fades above its 100 line, while the Relative Strength Index (RSI) indicator eases from overbought readings, but still stands at 66, in line with buyers' dominance. Trend-following bias would remain intact while the metal respects the rising 20-period SMA, with pullbacks expected to be shallow if buyers defend that zone.

In the daily chart, XAU/USD is developing above all its moving averages, with a flat 20-day SMA holding above the bullish 100- and 200-day SMAs. The mentioned 20-day SMA provides support at $4,076. At the same time, the Momentum indicator holds above its midline, but aims marginally higher, while the RSI indicator flattens around 64. Buyers should retain control as long as the 20-day SMA holds, with scope to extend its advance towards the $4,300 threshold once the price surpasses the intraday high at $4,245.

(The technical analysis of this story was written with the help of an AI tool)