Gold Price Forecast: XAU/USD rebounds; will it last?
- Gold stages a comeback in Asian trades on Tuesday, after having found brief support near $4,650.
- The US Dollar uptrend stalls amid US-Iran de-escalation, easing US-India trade tensions and data disruption.
- Gold fails to close Monday above the 21-day SMA, but RSI recaptures the midline on the daily chart.
Gold is reversing a part of the 15% correction from record highs of $5,598 early Tuesday, drawing support from uncertain-led by the US partial government shutdown and a broad US Dollar retreat.
Is Gold price correction over?
Gold rebounds, despite an upbeat market mood, as a ‘sell-everything’ theme fades this Tuesday, with the focus turning back toward the US economic fundamentals.
The US government entered into its fourth day of a partial shutdown, as Democrats continued to demand immigration reforms as part of any funding deal to reopen the government.
“Senate Democrats and Republicans agreed to a package of five spending bills on Thursday, but stripped out a sixth bill on full fiscal year funding for the Department of Homeland Security (DHS),” per BBC News.
The ongoing partial government shutdown once again prompted economic data disruption, as the Bureau of Labor Statistics (BLS) announced that it won’t release the January jobs report on Friday.
Meanwhile, the JOLTS Job Openings Survey, due on Tuesday, will also be delayed. The postponement of data could once again raise concerns over its impact on the Fed’s policy outlook. This seems to be somewhat weighing on the US Dollar (USD), checking its uptrend and helping Gold find its feet.
The Greenback is also facing headwinds from a recovery in risk sentiment amid the de-escalation of geopolitical tensions between the United States (US) and Iran and the US-India trade deal optimism.
“Iranian Foreign Minister Abbas Araghchi suggested that talks could take place imminently. US President Donald Trump on Saturday said Iranians were “seriously talking to us” as he hinted at a deal to avert military strikes against Tehran,” per The Guardian.
Meanwhile, the long-standing US-India trade deal was finally sealed on Monday night, with the Trump administration having lowered the country-specific reciprocal tariff on Indian imports to 18% from 25%.
These geopolitical de-escalations, however, could also limit the upside in the traditional safe havens such as Gold. That being said, the resurgence of US economic concerns could keep the downside cushioned in the bright metal, for now.
Amid a data void, Gold traders will take cues from speeches by Fed policymakers for fresh insights on the US central bank’s path forward on interest rates, especially with the former Fed Governor Kevin Warsh set to take over the reins from June.
Gold price technical analysis: Daily chart
The 21-day Simple Moving Average (SMA) rises above the 50-, 100-, and 200-day SMAs, and price holds above all of them, reinforcing a bullish bias. The longer SMAs continue to climb, signaling a well-established uptrend. The Relative Strength Index (RSI) at 51 reflects neutral momentum after cooling from recent overbought readings. Immediate dynamic support sits at the 21-day SMA at $4,779.68; holding above it would keep the bullish tone intact.
The 50- and 100-day SMAs trend higher beneath price and remain stacked below the 21-day SMA, highlighting sustained buying pressure. The 200-day SMA also rises, underscoring a firm broader positive structure. RSI near 50 caps momentum for now, and a decisive uptick would reassert the upside. A pullback could test support at the 50-day SMA at $4,499.64, with the broader bias staying positive while price holds above that level.
(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.
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.
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