Gold Price Forecast: XAU/USD hesitates around $4,700 with geopolitics, central banks eyed
- Gold treads water around $4,700 despite broad-based USD weakness.
- Hopes of a peace deal in the Middle East remain alive, keeping the USD on its back foot.
- Later this week, the Fed's monetary policy decision might determine the USD's near-term direction.
Gold’s (XAU/USD) has opened the week in the same cautious mood that ended the last one. The precious metal keeps hovering within a tight range around $4,700 at the time of writing, with doji candles on the daily chart highlighting an indecisive market.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of currencies, is looking weak on Monday amid a mild optimism about the end of the US-Iran war. News of further moves to advance toward a deal keeps investors hopeful, but the Strait of Hormuz remains closed, and the second round of peace talks has been cancelled. This maintains investors' appetite for risk subdued, and leaves precious metals practically flat.
The market is also attentive to a slew of central bank monetary policy decisions, with particular interest in the Federal Reserve’s (Fed), due on Wednesday. The Fed is widely expected to leave interest rates on hold and hint at a steady monetary policy for the near-term. Chairman Jerome Powell, however, is also likely to leave his place to former Governor Kevin Warsh, who might pursue a more dovish policy.
Technical Analysis: Key support is at the $4,600 area
The technical picture shows XAU/USD trading within a tight range, inside a wider horizontal channel, with key support at the $4,600 area.
Technical indicators on 4-hour charts highlight a neutral-to-slightly bearish bias, with the Relative Strength Index (RSI) around 45, while the positive Moving Average Convergence Divergence (MACD) reading suggests tentative upside momentum that has yet to overcome dense resistance overhead.
Dips have been contained above Friday's low, around $4,660, although the bottom of the channel, at $4,600, remains on the bears' focus. A confirmation below here would increase pressure towards the March 26 low, at the $4,350 area. On the topside, resistance in the area between $4,745 and $4,770, which held upside attempts several times last week, is capping bulls for now and closing the path to the channel top, around $4,885.
(The technical analysis of this story was written with the help of an AI tool.)
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.