Gold Price Forecast: XAU/USD rebounds, but is it out of the woods yet?
- Gold holds the recovery from seven-week lows, but remains below $4,600 early Thursday.
- The US Dollar Index corrects sharply on US-Iran peace deal hopes, but hawkish Fed expectations could limit the downside.
- Gold defends the falling wedge resistance-turned-support near $4,430, with bearish daily RSI in play.
Gold is looking to build on the previous recovery from seven-week lows of $4,454 early Thursday, with buyers eyeing a retest of the $4,600 threshold amid positive risk sentiment.
Gold stays supported amid market optimism
Asian markets take the positive lead from Wall Street overnight amid renewed hopes that a peace deal between the United States (US) and Iran is in the offing, especially after President Donald Trump said that the US was in the 'final stages' with Iran.
That, alongside upbeat earnings results from the American artificial intelligence (AI) pioneer Nvidia and a suspended workers' strike at Samsung Electronics, lifted shares of chipmakers and, in turn, the market mood.
The sustained market optimism diminishes the safe-haven appeal of the US Dollar (USD) while keeping Oil prices and inflation fears in check. These factors help Gold maintain its recovery momentum.
However, it remains to be seen if the bright metal extends its recovery beyond the $4,600 round figure amid hawkish expectations around the US Federal Reserve (Fed) interest rate outlook.
The Minutes of the Fed’s April monetary policy meeting showed on Wednesday that “a majority of Fed policymakers felt ‘some policy firming would likely become appropriate’ if inflation stays persistently above the central bank's 2% target,” per Reuters.
Further, Gold’s turnaround could face headwinds if the geopolitical situation between the US and Iran turns south; with Trump doubling down on the warning of further attacks unless Iran agreed to reach a deal.
Also, the top-tier US S&P Global Manufacturing and Services PMI data will be closely eyed for a fresh take on the economy and the Fed’s policy outlook, which could have a strong bearing on the non-yielding Gold.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,547.63. The pair remains under a clear topside cap, with price holding below the 21-day simple moving average (SMA) at $4,623.97, the 50-day SMA at $4,678.34 and the 100-day SMA at $4,796.64, keeping the near-term bias bearish despite a modest rebound off recent lows. The longer-term backdrop is still constructive as bullion trades above the 200-day SMA at $4,370.13, yet a Relative Strength Index (14) reading near 42 hints at lingering downside pressure while the broader downward resistance trend line continues to weigh on rallies.
On the topside, initial resistance is located at the 21-day SMA near $4,623.97, with additional barriers at the 50-day SMA around $4,678.34 and the 100-day SMA at $4,796.64, ahead of the descending resistance trend line that has repeatedly capped advances in recent months. On the downside, the 200-day SMA at $4,370.13 marks the next significant support level; if the falling wedge resistance-turned-support near $4,430 gives way. A decisive break beneath this longer-term 200-day SMA floor would likely open the way to a deeper corrective phase.
(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.
