Gold Price Forecast: XAU/USD’s struggle with 21-day SMA extends ahead of US-Iran talks
- Gold keeps its range around $4,050 early Monday, consolidating the previous decline.
- The US Dollar holds losses, fuelled by the USD/JPY slump and Mideast diplomacy hopes.
- Gold awaits a clear directional breakthrough, but sellers likely have the upper hand on the 1D chart.
Gold is consolidating the previous decline, keeping the offered tone intact around $4,050 in Asia on Monday, as a bearish near-term technical outlook overshadows bullish fundamental factors.
Gold sellers dominate as the NFP week kicks in
Gold begins the Nonfarm Payrolls (NFP) week on a negative note, holding the previous week’s downside bias.
The latest leg down in Gold is sponsored by persistent bets on a US Federal Reserve (Fed) interest rate hike in September, with markets still pricing in a 65% chance of such a move, per the CME Group’s FedWatch Tool.
However, the further downside appears capped by broad-based US Dollar (USD) weakness, fuelled by the USD/JPY sell-off and hopes of US-Iran diplomatic efforts.
USD/JPY slumped in early Asian trades after the Japanese Yen (JPY) suddenly jumped amid speculation of additional intervention. The pair plunged over 1% to its lowest level in three months below 155.50 before quickly rebounding to near 156.50, where it now wavers.
Meanwhile, the safe-haven premium for the USD seems to have faded after US President Donald Trump called off fresh attacks on Iran and announced peace talks later on Monday, sending Oil prices sharply lower and slightly easing inflation fears.
Looking ahead, it remains to be seen if Gold recovers ground or extends the drop as the US-Iran talks and the US ISM Manufacturing PMI loom.
These event risks could provide a fresh trading impetus to the USD and Gold traders, as they gear up for the high-impact US Nonfarm Payrolls (NFP) data due later this week.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,065.79, keeping a bearish near-term tone as spot holds below all major moving averages. The 21-day simple moving average (SMA) at $4,066.82 is being tested just overhead, while the longer-term 50-day, 100-day and 200-day SMAs at $4,174.88, $4,416.37 and $4,490.35 respectively, line up as layered resistance, suggesting rallies remain capped for now. The Relative Strength Index (14) at 47.48 sits just under the neutral 50 line, hinting at subdued momentum rather than a decisive reversal.
On the topside, initial resistance is the nearby 21-day SMA at $4,066.82, followed by the 50-day SMA at $4,174.88. Above there, the 100-day SMA at $4,416.37 and the 200-day SMA at $4,490.35 form a broader supply zone that would need to be reclaimed to soften the bearish bias. With no clear moving-average supports below the current price in this dataset, any further decline would likely seek validation from prior swing lows on the chart, while recovery attempts are expected to struggle beneath the clustered daily SMAs.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold outlook capped as Fed expectations and muted demand weigh
Analysts at Commerzbank argue that the macro backdrop remains a headwind for bullion, with “the persistent expectation of Fed interest rate rises” seen as likely to “counteract any rise in the gold price.” They add that these rate expectations are “unlikely to fade for the time being, as inflation is not yet showing sufficient signs of easing,” limiting scope for a more sustained rally.
On the demand side, Commerzbank highlight World Gold Council projections, noting that “for the second half of the year, the WGC does not anticipate any significant upturn in demand.” While official sector buying is expected to remain an important pillar of support, the bank cautions that “whilst central bank gold purchases are expected to remain strong due to portfolio diversification and as a hedge against inflation and risks, they are likely to remain below the previous year’s level.”
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.
