Gold Price Forecast: XAU/USD resumes its uptrend, heading to $3,365 and $3,415
- Gold rallies with trade uncertainty, US debt woes hurting the US Dollar.
- Investors await the US ISM Manufacturing PMI data and Fed Powell's comments.
- XAU/USD is on a positive trend, with bulls aiming for $3,365 and $3,3415.
Gold (XAU/USD) has been one of the major beneficiaries of the US Dollar sell-off on Monday. The Precious metal has surged about $60 so far, as the US dollar drops across the board on a mix of trade uncertainty and looming woes about the US fiscal health.
Trump rattled markets on Friday, announcing plans to double tariffs on Steel and Aluminium imports, and still had time to open a new front in a confrontation with China about minerals trading.
Investors' concerns that these developments will end up weighing on growth and stoking inflation have revived fears of stagflation. This, coupled with the ongoing fears about the impact of a tax-slashing bill that will boost US debt, has given a fresh boost to the “sell America” trade that has been so positive for Gold over the last few months
XAU/USD Technical Analysis
Gold prices seem to have completed last week’s corrective move, ready to resume their broader bullish trend, fuelled by a weaker USD. US ISM Manufacturing figures and Powell´s comments today are likely to determine the US Dollar’s direction.
Bulls are testing three-week highs at $3,365 at the moment. A confirmation above here will clear the path to $3,415 ahead of May’s peak at 3,440.
On the downside, immediate support is at the $3,285 area and $3,345.
XAU/USD 4-Hour Chart
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.
