Gold Price Forecast: XAU/USD range play extends amid geopolitics, ahead of US inflation test
- Gold extends its struggle below $4,200 early Tuesday as geopolitical risks weigh.
- US Dollar pinned down by retreating Oil prices and US Treasury bond yields.
- Technically, the daily bearish RSI continues to caution Gold buyers.
Gold continues to move back and forth in a narrow range below $4,200 in Asia on Tuesday, consolidating its recovery from two-month troughs.
Gold struggles below $4,200
Despite a broad-based US Dollar (USD) retreat from an 18-month peak, Gold keeps facing headwinds from geopolitical risks in the Middle East and between Russia and Ukraine.
These keep expectations for high inflation alive, even as Oil prices and US Treasury bond yields are off their recent multi-month highs.
According to The Guardian, “Saudi Arabia has been forced to suspend all flights to and from its main international airport in Riyadh until next Saturday after a further round of Houthi missile attacks caused more damage and left one person dead.”
More missiles were fired at Saudi Arabian cities by the Houthis on Monday, a Saudi Arabian military spokesperson said.
Meanwhile, Ukrainian President Volodymyr Zelenskyy on Monday accused Russia of continued missile and drone attacks on Ukrainian energy infrastructure. This came after US President Donald Trump claimed that Moscow had agreed to an "energy ceasefire" aimed at sparing energy-related infrastructure in Russia and Ukraine.
However, the downside in the non-yielding bullion appears capped by the sharp sell-off in Asian stocks, hit by tumbling artificial intelligence (AI) stocks and profit-taking as the third-quarter earnings season begins.
Additionally, increased bets that the US Federal Reserve (Fed) will hold interest rates this month continue to support Gold. Traders now look forward to Wednesday’s US Consumer Price Index (CPI) data release for fresh insights on the Fed’s interest rate outlook for the rest of this year.
The inflation report is one of the last major economic releases before the US Federal Reserve's (Fed) monetary policy meeting due later this month.
US CPI seen as key driver for near-term Fed expectations
Analysts at Societe Generale highlight that, beyond geopolitics, “the week's main non-geopolitical event comes on Wednesday with the release of US CPI.” They argue that if “we see a pickup in core inflation to 2.5% (the market consensus), there will be little chance of any shift in market expectations: no rate hike this month, but a very strong chance of one in December and another in Q1.”
In the meantime, geopolitical developments worldwide will keep influencing the Gold price action.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,184.28. The metal remains under a clear bearish bias as it holds below the 50-day simple moving average (SMA) at $4,339.65, the 100-day SMA at $4,252.86 and the 200-day SMA at $4,527.18, keeping the broader downtrend in place despite a modest rebound from recent lows. The 14-day Relative Strength Index at 45.10 is mid-range and slightly recovering, which hints at easing bearish momentum rather than a decisive shift in trend.
On the topside, initial resistance is located at the 100-day SMA near $4,252.86, with a subsequent barrier at the 50-day SMA around $4,339.65; a sustained break above these clustered averages would be needed to soften the prevailing negative tone, while the 200-day SMA at $4,527.18 marks a more distant cap and a key medium-term hurdle. On the downside, the next notable support sits at the upward trendline break level around $4,001.82, where buyers may attempt to defend the broader bullish structure from earlier in the year.
(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.
