Gold Price Forecast: XAU/USD tests 50-day SMA support, with eyes on Middle East war
- Gold hits monthly lows near $4,970, then rebounds above $5,000 in Monday’s Asian trading.
- The US Dollar stalls its uptrend as markets turn cautiously optimistic on Strait of Hormuz reopening hopes.
- Technically, Gold closed the week below 21-day support-turned-resistance; RSI turns bearish.
Gold is re-attempting bids above $5,000 in Monday’s Asian trades, fading a brief dip to monthly lows near the $4,970 region. The headlines surrounding the Middle East war continue to impact the US Dollar (USD) and thus the bright metal.
Gold battles the $5,000 mark amid cautious optimism
Gold battles the critical $5,000 psychological level amid a bull-bear tug-of-war as traders remain divided between hopes for the re-opening of the Strait of Hormuz and looming risks that the United States (US) could seize the critical oil depot on Iran’s Kharg Island.
The Wall Street Journal (WSJ) reported late Sunday that the White House plans to announce that multiple countries have agreed to form a coalition to escort ships through the corridor, adhering to US President Donald Trump’s calls to the allies to help secure the Strait.
Trump has warned that NATO faces a “very bad” future if US allies fail to assist in opening up the Strait of Hormuz, the Financial Times (FT) reported.
At the same time, “Trump is considering the possibility of seizing Iran’s Kharg Island oil export hub, a move that would require deploying US ground forces,” according to Axios.
These mixed headlines fail to provide a fresh lift to the US Dollar (USD) while keeping Gold prices in limbo.
Later in the day, the Iran war headlines will continue to play a pivotal role in the Gold price action as markets bet on the next direction in Oil prices.
Gold could risk a brief corrective pullback as traders might cash in on their USD longs ahead of Wednesday’s US Federal Reserve (Fed) monetary policy decision.
Gold price technical analysis: Daily chart
The near-term tone is mildly bullish, with price holding just above the 50-day Simple Moving Average (SMA) near $4,955 and comfortably above the 100- and 200-day SMAs around $4,575 and $4,060, respectively. The 21-day SMA around $5,115 has flattened but still hovers above spot, indicating a shallow consolidation within a broader uptrend rather than a full reversal. The Relative Strength Index (RSI) at 47 remains close to the neutral midline, suggesting momentum has cooled without shifting decisively in favor of sellers.
Immediate support emerges at the 50.0% Fibonacci retracement of the $4,402–$5,598 rally at $5,000, with the 38.2% retracement at $4,859 reinforcing a lower support area if the metal extends its pullback. Below that, the clustered 50-day and 100-day SMAs would strengthen the $4,950–$4,575 region as a broader demand zone. On the upside, initial resistance aligns with the 21-day SMA near $5,115, followed by the 61.8% retracement at $5,141, where a break would open the way toward the $5,342 level marked by the 78.6% retracement. A daily close above that latter barrier would re-expose the recent $5,598 high.
(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.
