Gold Price Forecast: XAU/USD picks up from the $4,000 area with bears still in control
- XAU/USD erases previous gains and returns to $4,030 after hitting fresh three-month lows at $3,986
- The sharp decline in US Treasury yields and dwindling hopes of Fed tightening provide some support to precious metals.
- Oil prices, at multi-month highs, are capping Gold's recovery attempts.
Gold (XAU/USD) is practically flat on the daily chart, just below $4,030 on Friday after bouncing up from 3-month lows in the $4,000 area. Precious metals are drawing some support from the sharp decline in US Treasury yields, but upside attempts remain limited, as Oil prices jumped to fresh highs, forcing global central banks to adopt more restrictive monetary policies.
The yield for the benchmark US 10-year note dropped 15 basis points on Thursday on its sharpest daily decline since 2023, as growing concerns about an AI bubble have triggered a rush for safety into US Government yields.
With this move, long-term Treasury yields head for a three-week decline, which eases pressure on the Federal Reserve (Fed), providing some leeway to the Federal Reserve (Fed) to assess the economic impact of September's rate hike, and increasing the appeal of yieldless precious metals.
Oil prices, on the other hand, are likely to remain a strong headwind for any significant Gold recovery. Brent Oil has reached fresh five-month highs above $110 while the US benchmark WTI barrel escalated above the $100 level earlier on the day.
Technical Analysis: Bulls will find resistance at the $4,070 area
XAU/USD trades at $4,024.42, extending with price action contained within a bearish channel from the early September high. The Relative Strength Index (RSI), however, has reached heavily oversold levels on the 4-hour chart, which suggests that bears might be exhausted and that some bullish correction should be considered.
On the topside, bulls are likely to meet resistance at the previous support area of $4,070 ahead of Tuesday's and Wednesday's high, near $4,150, and the area between $4,200 and $4,220, which has capped rallies several times in October.
Below the $4,000 area, bears are likely to face strong support at the year-to-date lows between $3,960 and $3,941. Further down, the channel bottom lies now around $3,925.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
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.
