Gold Price Forecast: XAU/USD needs a weekly closing above $4,165 to sustain the recovery
- Gold builds on post-US NFP gains early Friday, sitting at eight-day highs just shy of $4,200.
- The US Dollar eyes a weekly loss amid easing Fed rate hike bets and the USD/JPY sell-off.
- Gold’s technical setup suggests a ‘sell-on-bounce’ trade amid bearish RSI and Death Cross.
Gold is holding firm near eight-day highs just below $4,200 in Friday’s Asian trades, on track to snap a four-week losing streak.
Gold buyers retain control
Buying interest in Gold remains unabated as the bright metal extends its recovery from the seven-month low of $3,942 reached earlier this week. In doing so, the bullion has taken out several key resistance levels, helped by the ongoing pullback in the US Dollar (USD) against its six major currency rivals.
The Greenback bears the brunt of renewed diplomatic efforts between the United States (US) and Iran toward a permanent peace deal and receding US Federal Reserve (Fed) interest-rate hike bets.
Qatar said on Wednesday that the discussions through mediators between the US and Iran made “positive progress.” Meanwhile, Iran issued a fresh warning for vessels to follow Tehran-designated routes through the Strait of Hormuz.
However, markets seem to pay little attention to the Middle East developments as the optimism over fading hawkish Fed expectations lifts risk sentiment.
On Thursday, the US Nonfarm Payrolls increased by 57,000 in June, well below expectations for a 110,000 rise. The Labor Force Participation Rate dropped to 61.5%, a more than five-year low. The weak jobs data suggested worsening US labor market conditions and prompted traders to dial down their bets for a potential rate hike in September.
Markets are now pricing in roughly a 54% chance of such a move in September, down from 66% before the data, according to the CME Group’s FedWatch Tool.
Recent less-hawkish comments from new Fed Chair Kevin Warsh also remain a drag on the USD, boding well for the non-yielding Gold. Warsh said he’s been encouraged by the recent easing of inflation expectations during his appearance at the European Central Bank (ECB) Forum in Sintra on Wednesday.
Furthermore, the recent USD/JPY sell-off, amid looming Japanese intervention risks, acts as a headwind for the buck.
Looking ahead, it remains to be seen if Gold retains its recovery momentum, as traders could resort to profit-taking heading into the weekend and thin liquidity, with the US celebrating Independence Day on Friday.
Additionally, Gold’s technical setup on the daily chart continues to caution buyers, despite easing bearish pressures.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,182.02. The near-term bias remains bearish as price holds below the 50-day simple moving average (SMA) at $4,402.46, the 200-day SMA at $4,486.06 and the 100-day SMA at $4,636.39, keeping the broader structure capped despite a modest rebound from recent lows. The 21-day SMA at $4,165.03 now offers nearby dynamic support, while the Relative Strength Index (14) at 47.24 hovers just below the neutral line, hinting at subdued but stabilizing downside momentum rather than a decisive bullish shift.
Further, the Death Cross remains in play after the 50-day SMA closed below the 200-day SMA on a weekly closing basis last Friday, keeping sellers hopeful.
On the topside, initial resistance is seen at the 50-day SMA around $4,402.46, with further barriers aligning at the 200-day SMA near $4,486.06 and the more distant 100-day SMA at $4,636.39, a cluster that would likely cap any recovery attempts unless decisively cleared. On the downside, immediate support is provided by the 21-day SMA at $4,165.03; a sustained break below this short-term floor would reopen the path toward lower levels, while holding above it could allow gold to consolidate within the broader bearish framework.
(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.
