Gold Price Forecast: XAU/USD hits lows near $4,110 as yields, Oil pick up
- Gold extends losses for the fourth consecutive day and approaches $4,100.
- The US Dollar picks up on higher US yields and Oil prices.
- Bears look at the bottom of the monthly range, around $4,070.
Gold (XAU/USD) extends losses for the fourth consecutive day on Wednesday as a moderate pick up on US Treasury yields and higher Oil prices support a mild US Dollar (USD) recovery from Tuesday’s lows. The precious metal has been consolidating just above $4,100 during the Asian and European trading sessions, with the key support area around $4,070 drawing closer.
Risk appetite remains subdued amid higher Oil prices, undermining demand for precious metals. Brent Oil appreciates 1.6% in the day so far, as a US-Iran peace deal remains elusive, with the conflict heading into its eighth month without an end in sight.
The arrival of Pakistan’s army chief Asim Munir in Tehran on Tuesday boosted hopes of a new round of negotiations between the US and Iran, but the talks crashed on Iran’s refusal to transfer enriched nuclear material abroad. US State Secretary Marco Rubio affirmed earlier on Monday that reaching a peace deal with Iran is extremely difficult and that the US will maintain economic pressure on the Islamic Republic.
The Iranian Foreign Minister, Abbas Araghchi, said on Iranian media that the Strait of Hormuz will remain closed until Washington accepts Iran’s conditions.
Technical Analysis: The range bottom, at $4,070 is drawing closer
XAU/USD trades just below $4,120, showing a capped tone after a nearly 1.3% reversal over the last three trading days. Momentum indicators reaffirm the bearish tone, with the 4-hour Relative Strength Index (14) in neutral-to-soft territory, and the MACD (12, 26, 9) in negative ground, altogether suggesting that recovery attempts are vulnerable
Bears remain contained above the $4,100 area (Intraday lows) with the bottom of October's trading range, in the $4,070 area on sight. Sellers are likely to need additional impulse to breach that level and head towards the late July and early August lows around the $4,000 psychological area.
Upside attempts, on the contrary, will likely be tested at the $4,190- $4,200 area, which has capped gains several times in the last few days. Further up, October's range top lies around the $4,230 area.
(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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