Gold Price Forecast: XAU/USD bids its time below $4,200 in a dozy week opening

XAU/USD consolidates last week's recovery, trading between $4,150 and $4,200 on Monday.
A moderately soft US Dollar is keeping precious metals supported on Monday.
Key resistance remains at the $4,230 area.

Guillermo Alcala FXStreet

Gold (XAU/USD) trades sideways on Monday with upside attempts capped below $4,200 and bears contained above the $4,150 area. Precious metals are drawing support from a moderately softer US Dollar, but the uptick in US Dollar yields limits rallies in an otherwise calm trading session.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of six peers, maintains the weak tone seen late last week and dips 0.1% from the daily opening level, although it remains trading within Friday’s range.

US data released last week confirmed that inflation is well above the Federal Reserve’s (Fed) 2% target for price stability, but Fed officials cooled hopes of back-to-back interest rate hikes. This prompted traders to scale down US Dollar long positions and provided some oxygen for precious metals.

Technical Analysis: Gold bulls aim for the $4,230 resistance area

XAU/USD trades at $4,171, holding a mildly bullish near-term bias yet with price action contained within Friday's trading range. Momentum indicators on 4-hour charts show a neutral-to -bullish trend, with the Relative Strength Index (RSI) near 53 and Moving Average Convergence Divergence (MACD) still in positive territory. Buyers, however, seem to need additional stimulus to breach overhead resistance.

Upside attempts remain capped below the $4,200 psychological level opn Monday, which is closing the path towards the top of the previous two weeks' range, in the $4,230 area. A break above that level would confirm a deeper recovery, with the next targets being the September 25 high, at $4,315, and the mid-September highs, in the $4,400 area.

Bears, on the other hand, remain contained below Friday's low near $4,150 ahead of the range bottom of $4,070. A bearish reaction below here cancels the bullish view and would likely increase pressure towards the late July and early August lows around the $4,000 psychological area.

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

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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

FXStreet

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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