Gold Price Forecast: XAU/USD holds losses below $4,360 despite a softer USD
- Gold languishes near two-and-a-half-month lows below $4,360.
- A tense truce in the Middle East has improved investors' sentiment, weighing on the safe-haven USD.
- The technical picture remains bearish with price action well below the 200-day SMA.
Gold (XAU/USD) trades flat on Tuesday, near two-and-a-half-month lows at $4,268, with upside attempts capped below $4,360 so far. A moderate risk sentiment improvement, amid halting hostilities in the Middle East, has failed to support Gold, which remains vulnerable, weighed down by higher US Treasury yields.
Israel and Iran maintain a tense truce, despite an Israeli attack on the Lebanese city of Tyre that killed eight people earlier on the day. US President Donald Trump showed confidence about sealing a deal with Tehran within days, which has boosted a mild appetite for risk, sending the safe-haven US Dollar moderately lower against its main rivals.
Precious metals, however, remain on the back foot, weighed down by high US Treasury yields. US macroeconomic data released last week, namely the bright Nonfarm Payrolls report, prompted investors to ramp up bets on Federal Reserve rate hikes in the mid-term, triggering sharp rallies in US yields and the USD. Markets are now in a wait-and-see mode ahead of the release of the US Consumer Price Index (CPI) figures due on Wednesday, to confirm Fed-tightening bets
Technical Analysis: Stuck at the bottom of a falling channel
XAU/USD trades at $4,337, keeping a bearish near-term tone after breaking below the key 200-day simple moving average (SMA) last Friday. The pair trades near the bottom of a descending channel, with a previous support area ahead of $4,370 holding upside attempts for now, and with the $4,268 low still at hand.
Momentum conditions in daily charts are weak, with the Relative Strength Index (RSI) hovering in the mid-30s and the Moving Average Convergence Divergence (MACD) line deep in negative territory, which together hint that downside pressure remains dominant.
On the downside, initial support lies at the mentioned Monday's low of $4,268, ahead of the lower boundary of the descending channel near $4,220. Further down, the year-to-date low lies in the $4,100 area.
Bulls, on the other hand, should extend gains beyond the $4,350-$4,365 area (March 28, May 29 lows) and the 200-day SMA, now around $4,445. This would ease downside pressure and expose the top of the bearish channel, which would meet the price around $4,540.
(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.