Gold Price Forecast: XAU/USD trades below $4,500 as bulls pause for a breather

Gold bulls take some profits off the table following this week’s record-setting run.
Dovish Fed expectations should cap the USD recovery and support the commodity.
The bullish technical setup further backs the case for the emergence of dip-buying.

Haresh Menghani FXStreet

Gold (XAU/USD) retreats slightly from a fresh all-time peak, around the $4,526 area touched earlier this Wednesday, and trades with a negative bias during the first half of the European session. The precious metal currently trades around the $4,485 region, down 0.25% for the day, though the downside seems limited amid a supportive fundamental backdrop.

Dovish US Federal Reserve (Fed) expectations might keep a lid on the US Dollar's (USD) modest intraday bounce from its lowest level since early October and act as a tailwind for the non-yielding Gold. Apart from this, rising geopolitical uncertainties could benefit the safe-haven bullion and contribute to limiting the downside, warranting caution for aggressive bearish traders.

The Relative Strength Index (RSI) is flashing extremely overbought conditions on the daily chart. This, in turn, prompts some profit-taking around the XAU/USD, especially after the latest leg up to a series of new record highs since the beginning of this week. The broader technical setup, however, favors bullish traders and backs the case for the emergence of some dip-buyers around the Gold.

An ascending channel guides the uptrend, with price stretching above its upper boundary near $4,430.50. The 50-day Simple Moving Average (SMA) rises steadily, and the XAU/USD holds above it, reinforcing a bullish tone. The Moving Average Convergence Divergence (MACD) line stands above the Signal line in positive territory, and the widening histogram suggests strengthening momentum.

With the XAU/USD holding above the channel cap, pullbacks would be cushioned by the 50-day SMA at $4,167.09. As long as MACD remains above zero and its histogram stays positive, bulls would retain control. RSI remains elevated, highlighting stretched conditions, yet the broader trend stays higher while the price holds over dynamic support. Hence, a pause would not derail the uptrend.

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

XAU/USD daily chart

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD battles 0.7000 amid bullish USD

AUD/USD keeps its offered tone intact near 0.7000 at the start of a new week, trading near its lowest level since August 4 amid a bullish US Dollar. US yields hold near multi-year highs amid inflation risks from higher oil prices and rising bets on an October Fed rate hike. This, along with the US-Iran standoff, continues to underpin the safe-haven buck and weigh on the pair ahead of Tuesday's RBA policy announcements.

USD/JPY climbs back toward 158.00 after BoJ minutes amid firm USD

USD/JPY finds dip-buyers and reverses part of Friday's slide driven by speculation that authorities will step in again to prop up the Japanese Yen. However, the BoJ's dovish Minutes cap the JPY. Meanwhile, the US Dollar regains traction as the US-Iran standoff supports crude oil prices, fueling inflation fears and reaffirming bets for an October Fed rate hike. This further supports the pair, driving it back toward 158.00.

Gold cracks $4,200 for the first time in eight weeks

Gold falls hard at the start of a new week, breaching $4,200 for the first time in eight weeks. Firming October Fed rate-hike bets, along with oil-driven inflation risks, keep US bond yields elevated near multi-year highs, helping the US Dollar regain positive traction amid persistent Iran risks. These factors weigh heavily on the bullion.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

After the Trump Xi summit, markets are trading three clocks

The summit delivered time, not a deal. Trade, oil and chips now each run to a date, and the macro backdrop matters more than the pageantry. Markets wanted a deal and got a calendar date instead. Xi Jinping left Washington on Friday after tea at the White House and a tour of the National Archives.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.