Gold Price Forecast: XAU/USD rebounds ahead of US ADP, will it last?
- Gold finds renewed Asian bids and retests $5,200 early Wednesday after the heavy sell-off on Tuesday.
- The US Dollar stands tall amid escalating Middle East tensions and reduced dovish Fed expectations.
- Gold defends $5,000 or 50% Fibo level after facing rejection at the 78.6% Fibo resistance at $5,342 amid bullish RSI.
Gold is replicating the recovery moves seen in Tuesday’s Asian trading on Wednesday, drawing support from persistent demand for safe-haven assets due to the escalation of the conflict in the Middle East.
Gold finds bargain-hunting demand on Iran war
Gold finds dip-buying demand once again at lower levels, propping up prices near 1.50% so far. The overall bullish trend in the traditional store of value, Gold, remains intact in the face of global uncertainty and market panic induced by the ongoing US-Israel war with Iran.
The recent pullback in Oil prices, combined with a pause in the US Dollar (USD) uptrend, seems to sponsor the latest rebound in Gold, following Tuesday’s heavy sell-off.
Oil prices are consolidating the rally to seven-month highs after US President Donald Trump reassured markets that the US will provide insurance for ships in Gulf amid Iranian attacks. Trump added that the US military will escort ships through the Strait for secure passage, if necessary.
Gold got smashed into the ‘sell everything’ mode a day ago, as investors deleveraged their positions in the yellow metal to cover their losses on global stocks.
Further concerns over higher inflation projections and reduced bets for US Federal Reserve (Fed) interest rate cuts, amid the energy shock triggered by the so-called closure of the Strait of Hormuz, weighed negatively on non-yielding assets such as Gold.
In the day ahead, Gold could build on its rebound if the US ADP Employment Change and ISM Services PMI data disappoint and squash hopes for a less dovish Fed, fuelling a correction in the Greenback.
Gold could also resume its bullish momentum if the Iran war escalates further and global risk aversion takes over markets yet again.
US and Israeli forces have attacked Iran for four days and Iranian drones and missiles have struck Gulf oil refineries and also US embassies in Saudi Arabia and Kuwait, per Reuters.
Gold price technical analysis: Daily chart
The near-term bias is mildly bullish as price holds above the 21- and 50-day Simple Moving Averages (SMAs), which rise steadily above the longer-term 100- and 200-day SMAs, reinforcing a prevailing uptrend. The latest Relative Strength Index (RSI) reading near 55 remains above the neutral midline, indicating positive but not stretched momentum after cooling from earlier overbought extremes. Price has reclaimed the 61.8% Fibonacci retracement at $5,141.05, measured from the $4,401.99 low to the $5,597.89 high, suggesting buyers are defending the current pullback zone within the broader advance.
Initial support emerges at the 61.8% retracement at $5,141.05, with the 21-day SMA around $5,067 and the 50% retracement at $4,999.94 aligning as a secondary floor if the daily close slips below the current level. A deeper setback would expose the 38.2% retracement at $4,858.82, where prior reaction lows and the rising 50-day SMA cluster into a stronger demand zone. On the upside, immediate resistance sits near the recent swing area around $5,260, followed by the $5,340 region close to the 78.6% retracement at $5,341.96. A daily close above that band would open the path toward the record area near $5,600, resuming the dominant bullish trajectory.
(The technical analysis of this story was written with the help of an AI tool.)
(The bullet point in this story was corrected on March 4 at 3:21 GMT to say that "Gold finds renewed Asian bids and retests $5,200," not $5,230)
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.
