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Gold Price Forecast: XAU/USD drifts lower with US CPI, Fed speakers in focus

  • XAU/USD extends its reversal from the $4,200 area to session lows below $4,150. 
  • Mild US Dollar weakness is keeping Gold from retreating further this week.
  • Dovish comments from Fed's Williams added bearish pressure on the USD on Tuesday.

Gold (XAU/USD) extends losses on Wednesday, despite the lower US Treasury yields, with investors looking from the sidelines ahead of the release of September’s US Consumer Price Index (CPI) report and speeches from Federal Reserve (Fed) officials due later in the day. The XAU/USD pair has retreated below the $4,150 level after rejection at the $4,200 area on Monday, with technical indicators showing building bearish momentum.

Fed officials failed to provide any significant support to the US Dollar on Tuesday. New York Fed President John Williams said in a Bloomberg interview that the US central bank might have to raise interest rates once more this year, but he also affirmed that he sees no need to hike borrowing costs higher in 2027.

These comments contrast with the market expectations of at least two interest rate hikes next year, and increase interest in Wednesday's US CPI figures and Thursday’s Producer Price Index (PPI) data. The market consensus anticipates a further acceleration in consumer prices in September that would pave the path for another Fed rate hike, most likely in December.

Technical Analysis: Momentum indicators turn bearish

Chart Analysis XAU/USD

XAU/USD is showing a growing bearish momentum after failing to break the top of the monthly trading range, at the $4,230 area earlier this week. The 4-hour Relative Strength Index (14) has dipped below the key 50 level, hinting at fading bullish pressure, while the Moving Average Convergence Divergence (MACD) turned negative, reinforcing a corrective bias after the recent advance.

Price action has extended below Monday's and Tuesday's lows, in the $4,150 area, bringing the range bottom in the $4,070 area into focus. A confirmation below here would expose the $4,000 psychological area.

On the topside, a break of the mentioned $4,230 area (October 2 high) would confirm an inverted Head & Shoulders (H&S) pattern and shift the focus to the September 25 high, a few pips above $4,300.

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

(This story was corrected on October 14 at 09:50 GMT to say that XAU/USD reached session lows below $4,150 and not session highs, as previously stated)

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

Guillermo Alcala

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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