Gold Price Forecast: XAU/USD pulls back before the next leg down
- Gold sees a dead cat bounce to near $4,000 early Friday, eyes biggest weekly drop in six.
- The US Dollar holds its recovery as US-Iran tensions intensify, fanning inflation risks and Fed hike bets.
- Technically, Gold looks to test the falling trendline support near $3,850 in the near term.
Gold is licking its wounds in Friday’s Asian trades, languishing close to two-week lows, as sellers stay hopeful of clinching the biggest weekly loss in six weeks.
Gold: Downside risks intact as Mideast woes intensify
Gold is trying hard to find a floor, but in vain, as sellers appear relentless, as the United States (US) entered its sixth day of renewed attacks on Iran on Thursday, which seems to have widened to other Gulf states, including Kuwait, Bahrain and Jordan.
The US intensified its military attacks on several targets in Iran and also fired on a tanker sailing towards Kharg Island, Iran’s biggest oil export terminal.
Iran retaliated by striking with missiles and drones at US allies in the region and asked its sponsored militant group in Yemen, the Houthis, to be prepared to close the oil route through the Red Sea if the US targeted Iranian energy infrastructure, per Reuters.
The ongoing US-Iran fighting keeps Oil prices near monthly highs (up roughly 12% this week), re-stoking inflation fears, while supporting bets for interest rate hikes by the US Federal Reserve (Fed), with the first one this year priced in as early as September.
During their latest speeches, several Fed officials publicly advocated rate hikes, given the renewed outbreak of hostilities in the Middle East, aiding the US Dollar’s (USD) rebound at the expense of the non-yielding Gold price.
Fed’s Jefferson delivered a moderately firm message, with the FXS Speechtracker score at 6/10, slightly above the 5.8/10 historical average, signaling a tone just marginally more resolute than the established baseline. The emphasis that the “current policy stance should support job market, allow inflation to resume decline toward 2%” while warning that a failure of inflation to cool would warrant reconsidering the stance underscores conditional hawkishness anchored in data dependence and the dual mandate tension amid overlapping energy, tariff, and AI shocks.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 126.57, confirming that the speech leaves overall Fed pricing firmly in hawkish territory despite the lack of incremental shift.
Meanwhile, the US Retail Sales and Jobless Claims data came in better than expected, contributing to the Greenback’s upswing.
Looking ahead, the University of Michigan (UoM) preliminary Consumer Sentiment and Inflation Expectations data will be awaited for fresh trading incentives in Gold, as traders continue to monitor the geopolitical developments in the Middle East amid bearish technicals.
Further, the end-of-the-week flows and profit-taking will likely remain in play as Gold lingers near year-to-date (YTD) lows of $3,942 reached a week ago.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $3,997.14, holding clearly below the 21-day simple moving average (SMA) at $4,076.42 and the 50-day SMA at $4,291.26, which keeps the near-term bias bearish and the metal under firm downside pressure. The longer-term 100-day and 200-day SMAs at $4,535.75 and $4,495.43, respectively, remain stacked well above spot, reinforcing a capped undertone. The Relative Strength Index (14) near 39 suggests weak but not oversold momentum, hinting that sellers still retain control while leaving room for further downside before exhaustion.
On the topside, immediate resistance emerges at the 21-day SMA at $4,076.42, with a break higher exposing the 50-day SMA at $4,291.26 as the next barrier. Above there, the 200-day SMA at $4,495.43 and the 100-day SMA at $4,535.75 define a dense medium-term resistance band that would need to be reclaimed to alleviate the broader bearish tone. With no nearby moving-average supports below the market, any fresh lows would leave price searching for a new structural floor, while failure to overcome $4,076.42 keeps risks skewed toward continued downside extension.
(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.
