Gold Price Forecast: XAU/USD recovery, likely to be challenged around $4,470

XAU/USD reaches session highs at $4,440 after bouncing from $4,380 on Wednesday.
US Dollar gives away gains as ADP jobs data disappoints and Fed's Williams tempers rate hike hopes.
Gold bulls are likely to meet resistance at $4,470 ahead of the 200-day SMA.

Guillermo Alcala FXStreet

Gold (XAU/USD) is trading higher on Thursday, returning to levels above $4.400 after bouncing from three-week lows near $4,280 on Wednesday. The precious metal is drawing support from a weaker USD, as ADP employment data disappointed and New York Federal Reserve (Fed) President John Williams tamed rate hike expectations, but Fed tightening bets remain solid, and bulls are likely to face significant resistance at $4,470.

US Data released on Wednesday revealed that private employment rose 38K in August, the weakest reading since January and well below the 47K increase expected.

Apart from that, New York Federal Reserve President John Williams said that rising bond yields are due to a solid economy, rather than to inflation fears, and suggested that the central bank should “wait and see” before taking decisions on interest rates. This cooled hopes of an immediate rate hike, although futures markets are still pricing a 60% chance of a 25 basis point hike at September's meeting, according to the CME’s FedWatch Tool.

Technical Analysis: Gold bulls have significant resistance ahead

XAU/USD has bounced up from lows and is trading returning to the $4,430 area, but keeps a mildly bearish near‑term tone following an impulsive reversal from last week's highs near $4,700. Momentum indicators are in neutral territory, with the daily Relative Strength Index (14) at 52 and the Moving Average Convergence Divergence (MACD) below zero, which shows that the bullish impulse is fragile.

Gold bulls are likely to be tested at the August 31 high, near $4,470, and, above here at the key 200‑day Simple Moving Average (SMA) at $4,533, which closes the path to last week's high, at $4,690. On the downside, a break of the August 14 low in the $4,310 area confirms a "Head and Shoulders" pattern, and adds pressure towards the August 6 low of $4,220 and the late July lows near $4,000.

(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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