Gold Price Forecast: XAU/USD retraces gains and nears two-month lows at $4,104

XAU/USD retraces previous gains and drifts closer to two-month lows near $4,100.
The US Dollar firmed up on Wednesday as investors brace for the release of the FOMC's meeting minutes.
Higher Oil prices, with Brent crude back above $100 are providing additional support to the USD.

Guillermo Alcala FXStreet

Gold (XAU/USD) retraces Tuesday’s gains on Wednesday and resumes its broader bearish trend, with the US Dollar (USD) appreciating across the board, as investors brace for the release of the minutes of the latest Federal Reserve (Fed) meeting. The XAU/USD pair trades below $4,120 after retreating from the $4,180 area on Tuesday, drifting closer to the two-month low at $4,104.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six majors, has retraced previous losses as investors grow wary of selling the USD ahead of the Fed minutes’ release. Beyond that, Oil prices have bounced up amid news of fresh tensions in the Middle East, setting some of the main US Dollar peers, namely the Euro, under pressure.

The Fed hiked rates by 25 basis points, bringing the fed funds rate to the 3.75%-4% range at the September meeting, and Chair Kevin Warsh surprised with an unequivocal hawkish message. Hopes of another interest rate hike in October, however, have faded amid soft inflation and employment reports and mixed comments by policymakers. That said, markets remain confident that the bank will hike rates again in December and at least one more time in early 2027.

Technical Analysis: Support around $4,100 likely to be tested again

XAU/USD trades at $4,119, maintaining a bearish near-term bias and holding under a descending trendline resistance from mid-August highs. Momentum indicators on 4-hour charts remain negative, with the Relative Strength Index (14) below 40 and the Moving Average Convergence Divergence (MACD) in negative territory, both hinting at persistent downside pressure.

A breach of the mid-term lows at $4,104 clears the path towards the late July and early August lows around the $4,000 psychological area, ahead of the year-to-date (YTD) low, at $3,941.

Bulls, on the other hand, should confirm above the mentioned trendline resistance, now around $4,200, and the top of the last two weeks' trading range, at $4,227 to gain confidence. Such a move would shift the focus toward the September 25 high, around $4,310, and the September 11 and 18 highs past $4,400.

(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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