Gold Price Forecast: XAU/USD finds support at the $4,300 area
- Later today US flash PMI and Fed Powell might provide further clues about the US central bank's rate path.
- Gold attempts to bounce up from lows below $3,900 remains capped at $4,045 area
Gold (XAU/USD) depreciated more than 4%, from all-time highs at $4,555, on its weakest performance in months amid thin trading volumes on Monday. The pair is now trying to pick up from the $4,300 area, supported by a sourer market sentiment on Tuesday, amid escalating geopolitical tensions.
Moscow announced on Monday that Russia will review its stance on the peace talks with Ukraine, after claiming an attack on President Putin’s residence. The alleged attack, denied by Kyiv, has dampened the frail hopes triggered by the meeting between US President Trump and his Ukrainian counterpart, Volodymyr Zelenskyy, over the weekend.
In the South East Sea, China extends its military drills around Taiwan for the second day, while US President Trump has warned about a new round of attacks on Iran if the Islamic Republic resumes its nuclear weapons program.
Later on the day, the US Federal Reserve will release the minutes of their December meeting and might have a relevant impact on the US Dollar and on precious metals.
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In the 4-hour chart, XAU/USD trades at $4,372.46, after bouncing from the $4,300 area on Monday. The Moving Average Convergence Divergence (MACD) histogram remains below zero but has been contracting from deeply negative readings, suggesting fading bearish pressure. The Relative Strength Index (RSI) stands at 38.93, below the 50 midline yet recovering from oversold, which hints at stabilizing momentum.
The pair broke the ascending trendline from mid-December lows, now at $4,450, which, together with the December 22 and 24 lows, at $4,430 and $4,448, are likely to challenge bulls and close the path to the record high, at the $4,555 area.
Downside attempts are so far contained above the 61.8/% Fibonacci retracement of the late-December rally, at $4,321 and Monday's low, at %$4,303. Further down, the next targets are the 78.6% Fibonacci retracement of the same cycle, and the 12 and 16 December lows, around $4,265, ahead of the December 9 and 10 lows, in the $4,110 area..
(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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