Gold Price Forecast: XAU/USD rebounds from two-month lows; will it sustain?
- Gold is bouncing back toward $4,150 early Thursday after defending $4,100 on Wednesday.
- US Dollar retreats on profit-taking, despite high Treasury yields and hawkish Fed Minutes.
- Risks remain skewed to the downside for Gold while RSI stays bearish.
Gold is building on its rebound from two-month lows of $4,067, aiming to regain the $4,150 level amid a broad US Dollar (USD) pullback and profit-taking.
Gold’s fate hinges on USD, yields
Gold buyers are coming up for air as the bright metal holds close to this week’s lower range.
The renewed uptick is mainly driven by a profit-taking spree across financial markets, particularly after the USD hit its highest level in eighteen months against its six major currency rivals.
However, further recovery attempts in Gold appear elusive amid elevated US Treasury bond yields, hawkish Minutes of the US Federal Reserve (Fed) September policy meeting, and resurfacing geopolitical risks between the United States (US) and Iran.
"The FOMC’s Minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting," Westpac analysts explained.
After the overnight retracement, the benchmark 10-year US Treasury bond yield is back above the 5.30% level, with Oil prices stalling their downtrend and traders assessing the latest geopolitical headlines.
According to Axios, the Pentagon told US Central Command (CENTCOM) several days ago to conclude preparations for resuming major combat operations in Iran. Meanwhile, conflict intensified in Yemen between the Iran-aligned Houthis and Saudi-backed government forces.
That said, Gold traders will likely stay alert for any US-Iran developments, while bracing for the US weekly Jobless Claims data and speech from several Fed policymakers.
US Treasury bond yields, Oil price movements, and geopolitical updates will keep Gold dancing to their tune.\
Gold floor seen holding as CTAs sell into emerging bull run
According to TD Securities, precious metals have come under “heavy selling pressure, with CTAs selling gold, silver and platinum,” as surging real rates and a firmer Dollar weigh on the complex. Even so, the bank argues that “a continued bid from discretionary traders, ETFs, and central banks all combine to provide a strong floor for gold,” with any weakness likely to be met by “a strong dip buying impulse for gold in particular as longer-term drivers and flows remain supportive.”
TD Securities highlights that the “drivers of these flows range from geopolitical risk, fiscal concern, dollar debasement, de-dollarization and stagflation concerns,” and therefore expects “the appetite to be more persistent and ultimately hold firm in the face of surging real rates.” Against this backdrop, the strategists conclude that “we continue to see the stage being set for gold to disconnect from real rates further and begin a new bull run into 2027.”
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,132.92, keeping a bearish near-term bias as spot holds below the 50-day simple moving average (SMA) at $4,332.14, the 100-day SMA at $4,263.22 and the 200-day SMA at $4,529.91. The clustering of these key averages above price suggests rallies remain vulnerable, while the Relative Strength Index (14) around 40 leans bearish but avoids oversold territory, hinting that sellers retain control without yet showing exhaustion.
On the topside, initial resistance appears at the 100-day SMA near $4,263.22, followed by the 50-day SMA at $4,332.14, with a more distant barrier at the 200-day SMA around $4,529.91. On the downside, the broken uptrend support line, now a structural floor around $3,999.19, is the first significant support level, and a clear break beneath this area would likely open the way for a deeper corrective phase in gold.
(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.
