Gold Price Forecast: XAU/USD unable to retain $5,000 aims to resume decline

XAU/USD Current price: $4,896

• Easing political tensions in the United States partially benefited the US Dollar.
• Signs of a cooling US labor market further fueled demand for the Greenback.
• XAU/USD briefly traded beyond the $5,000 level, but the intraday retracement hints at lower lows ahead.

Gold price extended its recovery and reconquered the $5,000 mark early on Wednesday, but changed course following the release of United States (US) data, and currently hovers at around the $4,900 mark. The US Dollar (USD) gained upward traction across the FX board following the release of encouraging American data and optimistic political headlines.

US President Donald Trump signed a bill ending the partial government shutdown late on Tuesday, spurring some near-term relief. He also announced that talks with Iran would be held later in the week in Oman, concerning the country’s internal crisis. Trump also reported that he had spoken with his Chinese counterpart, Xi Jinping, referring to the phone call as “excellent” and listing several issues discussed.

Data-wise, the US ADP Employment Change report showed that the private sector added 22K new positions in January, missing expectations of 48K. The ISM Services Purchasing Managers’ Index (PMI) resulted at 53.8 in the same month, matching the previous monthly reading while beating the 53.5 expected. Further details show that the Prices Paid Index, an inflation barometer, rose to 66.6 from 65.1, while the Employment Index fell to 50.3 from 51.7.

It appears that market participants welcomed the loosening of labor conditions, a critical factor in the Federal Reserve’s (Fed) decision-making. The market sentiment, however, is not completely positive: US indexes trade mixed, with only the Dow Jones Industrial Average (DJIA) trading in the green, after European indexes closed the day mixed.

Speculative interest is now eyeing central banks' announcements, as the Bank of England (BoE) and the European Central Bank (ECB) will unveil their monetary policy decisions on Thursday. Both are expected keep interest rates on hold, although the BoE announcement could be far more interesting as officials may hint at additional interest rate cuts in the near future.

XAU/USD short-term technical outlook

Gold's intraday slide hints at further falls ahead. In the 4-hour chart, XAU/USD is just above a mildly bearish 20-period Simple Moving Average (SMA), which stands right below a slightly positive 100 SMA, the latter at $4,893. A break below it should put bears back on track and could lead to a test of the next dynamic support, an ascending 200 SMA at $4,668.69. At the same time, technical indicators turned sharply lower, in line with increased selling interest. The Momentum indicator still holds above its midline, but the Relative Strength Index (RSI) indicator stands at 46, anticipating lower lows ahead.

In the daily chart, XAU/USD holds above all its moving averages, with the 20-day SMA climbing above the 100- and 200-day SMAs, reinforcing a bullish trend. The shorter moving average provides nearby support at $4,824.48. Other than that, the Momentum indicator and the RSI stand within positive levels, but once again have lost their positive momentum, reflecting a sharp retracement in buying interest.

(The technical analysis of this story was written with the help of an AI tool.)