Gold Price Forecast: XAU/USD returns to familiar range around $4,500; what next?
- Gold looks to build on the previous recovery from two-month lows, re-attempts $4,500 early Friday.
- The US Dollar consolidates the downside amid renewed US-Iran peace deal hopes, mixed markets.
- Technically, Gold defends the 200-day SMA just above $4,400 despite the bearish momentum.
Gold is struggling to extend the previous rebound from two-month lows of $4,367 early Friday, challenging offers once again above $4,500, while on track to book another weekly loss.
Gold trades with caution amid a fragile US-Iran situation
Gold buyers appear to have turned cautious in Asia this Friday as traders assess the reports of a US-Iran peace framework against the latest exchange of strikes from both sides near the Strait of Hormuz.
Axios on Thursday reported that the United States (US) and Iran have reached a tentative 60-day memorandum of understanding (MOU) to extend the ceasefire and begin formal nuclear negotiations.
The report further noted that the agreement still required final approval from President Donald Trump, who reportedly asked for several days to review the proposal.
Also, there is no official confirmation yet from the Iranian side, following this report. Meanwhile, there were reports that a US aircraft was destroyed near Iran’s Bushehr, though the US Military was quick to clarify that "Iran's state TV claim of Iranian forces downing US aircraft near Bushehr is false."
In light of these ongoing hostilities in the Gulf, the US-Iran peace deal optimism seems to have faded, offering a floor to the safe-haven US Dollar (USD) for now, while limiting recovery attempts in Gold.
Additionally, the Greenback keeps finding support from hotter-than-expected inflation data-led Federal Reserve (Fed) interest rate hike expectations.
Data on Thursday showed that the Fed’s preferred inflation measure, the core Personal Consumption Expenditures (PCE) Price Index, advanced 3.3% on year-over-year basis, versus the central bank’s 2% target, its fastest increase in three years.
Moving on, the next move in Gold will depend on the incoming updates on the US-Iran truce front and the Oil price action. As of writing, the recent pullback in Oil prices is also helping Gold hold onto its ground above the critical daily support.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,496.39. The metal remains under pressure as spot holds below the short and medium-term simple moving averages (SMAs), with the 21-day SMA near $4,585 and the 50-day SMA around $4,627 reinforcing a bearish tone while price clings only marginally above the long-term 200-day SMA at roughly $4,405. The Relative Strength Index (14) at about 42 sits in bearish territory, suggesting downside momentum is still dominant even as the market consolidates just under recent breakdown levels.
On the topside, initial resistance is seen at the 21-day SMA around $4,585, followed by the 50-day SMA near $4,627, while the 100-day SMA up at roughly $4,802 marks a stronger barrier should a deeper corrective bounce unfold. On the downside, immediate support is aligned with the latest reaction area on the descending trend line close to $4,496, ahead of more meaningful protection at the 200-day SMA around $4,405; a clear loss of this latter level would likely open the door to a more pronounced bearish extension.
(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.
