XAU/USD Weekly Forecast: Bulls return and aim for record highs
- Central banks maintained doors open for rate cuts, refrain from clarifying dates.
- Tepid United States employment-related figures put pressure on the US Dollar.
- XAU/USD turned bullish and may challenge its record high at $2,431.40.
Spot Gold price (XAU/USD) heads into the weekly close posting solid gains and changing hands at around $2,360 a troy ounce. XAU/USD struggled for direction, spending most of the week hovering between $2,300 and $2,330. The bright metal woke up on Thursday as market participants rushed to drop the US Dollar (USD) on renewed Federal Reserve (Fed) rate-cut hopes.
In the absence of relevant data, speculative interest took clues from central banks’ monetary policy announcements and United States (US) employment-related figures.
Central banks, employment and more
The Reserve Bank of Australia (RBA) met this week to decide on monetary policy, and as widely anticipated, the Board kept the Official Cash Rate (OCR) at 4.35%, a twelve-year high. Most relevantly, the Board introduced no relevant changes to the accompanying statement despite investors’ concerns about a hawkish shift. In the previous meeting, the RBA dropped the tightening bias and refrained from reinstalling it in May.
However, RBA Governor Michele Bullock repeated that policymakers are prepared to act if inflation, particularly in the services sector, stays stubbornly high.
Also, the Bank of England (BoE) unveiled its monetary policy decision and announced the benchmark interest rate would remain steady at 5.25%. Alongside the announcement, the central bank released the Monetary Policy Report, which brought some interesting surprises. Growth forecsats were revised higher, while inflation is now seen lower.
UK GDP is expected to be 0.2% in Q2, rising to 0.9% in a year’s time, then 1.2% in 2026, and 1.6% in 2027. The new projections see the annual inflation rate to be 1.9% in two years and 1.6% in three years, below the BoE’s 2% target. Governor Andrew Bailey even said rate cuts may be sharper than what markets anticipate.
In both cases, the local currencies lost value against the US Dollar, giving the latter a breath.
However, things changed on Thursday when the US released Initial Jobless Claims for the week ending May 3. In the absence of more relevant data, investors found clues in signs of a loosening labor market, as seasonally adjusted Initial Jobless Claims jumped to 231K in the week ending May 3, the highest reading since November 2023.
Market players started piling up bets on Fed rate cuts and dropped the Greenback. Despite the upbeat mood, the safe-haven metal found its way up.
Changing the focus to inflation
In the upcoming days, the focus will be on US inflation. The country will unveil the April Consumer Price Index (CPI), foreseen at 0.3% MoM, easing from the previous 0.4%, and the Producer Price Index (PPI) for the same month. Despite the Fed basing its decision on an alternative inflation measure, these readings tend to have a large impact on the USD. The US macroeconomic calendar will also include Retail Sales for the same month.
Also relevant, China will release a bunch of data next Friday, including April Retail Sales, Industrial Production and the House Price Index.
XAU/USD technical outlook
XAU/USD trimmed most of the previous two weeks’ losses and trades in the $2,360 price zone. Technically, the weekly chart puts bulls back in the driver’s seat, given that technical indicators resumed their advances after correcting extreme overbought conditions. Furthermore, a firmly bullish 20 Simple Moving Average (SMA) accelerated its advance far below the current level, while the longer moving averages also gain upward traction below the shorter one.
The bullish case is also clear in the daily chart. XAU/USD trades below a directionless 20 SMA, which provides dynamic support at around $2,035. At the same time, the 100 and 200 SMA picked up a bullish pace over $200 below the current level, suggesting the consolidative phase came to an end. Finally, the Momentum indicator crossed its midline with a vertical slope, while the Relative Strength Index (RSI) indicator advances at around 61, reflecting increased buying interest.
XAU/USD should find resistance around $2,395 at first and $2,431 afterwards. Beyond the latter, the rally could extend towards $2,450 en route to the $2,500 mark. On the other hand, support can be found around $2,330, while firmer buying interest will likely defend the downside around the $2,300 threshold.
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
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
