Gold Price Forecast: XAU/USD returns above $4,600 as the US Dollar eases
- Gold appreciates after a three-day sell-off and returns above $4,600.
- The US Dollar gives away gains as the dust from the Fed's decision settles.
- XAU/USD is testing trendline resistance at $4,640.
Gold (XAU/USD) is trading higher following a three-day sell-off on Thursday. The precious metal reaches levels above $4,600, returning to the last four weeks’ trading range, as the US Dollar (USD) retreats from Wednesday’s highs and the dust of the US Federal Reserve’s (Fed) interest rate decision settles.
The US Dollar Index (DXY) has pulled back from the 99.00 line as US Treasury yields give away gains following Wednesday’s rally. The Fed sent US yields and the US Dollar higher on Wednesday, as three policymakers opposed the “easing bias” language in the statement, and Fed Chair Powell announced that he will continue as Governor, practically replacing US President Donald Trump’s appointment to the committee, Stephen Miran, who voted for a rate cut.
Technical Analysis: Testing trendline resistance
XAU/USD price action holds within a downward parallel channel, but technical indicators on the 4-hour chart point to an improving momentum. The Relative Strength Index (RSI) has popped up above 50, and the Moving Average Convergence Divergence (MACD) line has crossed above the Signal line, adding to the case of a bullish reversal.
The precious metal is now testing the top of the downtrend channel, around $4,640. Further up, the previous support area around $4,665 and the April 24 and 27 highs near $4,730 are likely to challenge bulls.
On the downside, key support is at the confluence of Wednesday's low with the channel base, near the $4,500 level. Further down, the March 26 low, at the $4,350 area, emerges as a plausible target.
(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.
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