Gold Price Forecast: XAU/USD stays below 20-day EMA, sees further downside below $3,940
- Gold price slumps to near $4,030 amid fears of persistently elevated inflation.
- Iraq suspends crude loading from all its terminals after a drone attack on the Basra terminal.
- US President Trump warns of attacking Iranian infrastructure.
Gold price (XAU/USD) is down 0.7% to near $4,030 during the European trading session on Thursday. The precious metal faces selling pressures as global inflation concerns remain intact amid elevated energy prices in the wake of widening military aggression between the United States (US) and Iran.
During the day, a drone crash into an oil tanker in Iraq's Basra terminal has resulted in the suspension of all crude loading on all Iraqi terminals. This has renewed fears of lower oil supply, a scenario that will keep energy prices elevated.
The scenario of higher energy prices de-anchors global inflation expectations, which prompts fears of tight monetary conditions by central banks. Theoretically, higher interest rate hike expectations bode poorly for non-yielding assets, such as Gold.
The war between the US and Iran could intensify further, as US President Donald Trump has warned of authorizing forces to attack Iranian infrastructure, most probably next week, if the nation doesn’t return to the table for negotiations, according to his comments in an interview with Fox News on Wednesday.
Meanwhile, easing hawkish Fed prospects are likely to limit the downside in the Gold price. Traders have dialed down the Fed’s interest rate hike expectations as US consumer and producer inflation has cooled down in July.
According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in the July meeting have eased to 10.2% from 24.6% recorded a week ago.
Gold technical analysis
XAU/USD trades lower at around $4,030, keeping a bearish near-term tone as spot remains below the 20-period exponential moving average (EMA) at $4,113.96.
The downside bias is reinforced by a mid-range Relative Strength Index (RSI) around 40, which suggests weak but persistent selling pressure rather than oversold exhaustion.
On the topside, initial resistance is clearly defined by the 20-day EMA at $4,113.96, and a sustained break above this barrier would be needed to ease the current bearish pressure. Looking down, the Gold price could slide towards the October 28 low of $3,886.62 if it falls below the June 30 low of $3,941.76.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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