Gold Price Forecast: XAU/USD stands above $4,800 despite higher risk appetite
- Gold reversal from $4,888 highs was halted above $4,770.
- Demand for precious metals remains steady despite the fading risk aversion.
- UP President Trump softened its attacks on Europe and allowed for some US Dollar recovery.
Gold (XAU/USD) pulled back from record highs a handful of dollars below $,4,900, following US President Trump’s softer tone at the Davos Forum, but the precious metal remains steady above $4,800, which shows that demand for safe assets remains steady.
Trump triggered a relief rally on Wednesday, stepping back on his plans to introduce additional tariffs on European countries and ruling out military action to seize Greenland. The US President also announced a framework deal over the Arctic island with NATO, although no details of the agreement have been disclosed.
Technical Analysis:
XAU/USD reversal from $4,888 record highs found buyers at the $4,770 area, which keeps the broader bullish trend intact. The pair has rallied more than 11% from January 1 and beyond 20% from early November lows, with no sign of a trend shift on the horizon so far.
Technical indicators in the 4-Hour chart endorse the bullish view. The 100-period Simple Moving Average (SMA) rises steadily, while the Moving Average Convergence Divergence (MACD) and Signal lines hover around the zero line, and the Relative Strength Index (RSI) prints at 66 after pulling back from overbought levels.
Immediate resistance is at the mentioned record high of high of $4,888. Further up, the next target is the area between the 265.8% Fibonacci extension of the January 8 to 15 rally, at $4,991, and the $5,000 round level. Supports are at Wednesday's low near $4,770 ahead of the January 16 and 19 highs, nesr $4,690.
(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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