Gold Price Forecast: At make or break around $4,550 while Fed’s policy in focus
- Gold price faces selling pressure as oil prices rise sharply amid fears of the US blockade extension on Iran.
- Investors expect the Fed to leave interest rates unchanged.
- The Fed is expected to hold interest rates at their current levels the entire year.
Gold price (XAU/USD) trades 0.5% lower to near $4,570 during the European trading session on Wednesday. The yellow metal tumbles as oil prices extend the rally, following comments from United States (US) officials that President Donald Trump has instructed aides to prepare for an extended blockade of Iran, The Wall Street Journal (WSJ) reported.
The extension of the US blockade on Iranian sea ports also suggests that the Strait of Hormuz, a vital passage to almost 20% of global energy supply, will remain closed further.
Theoretically, higher oil prices de-anchor inflation expectations globally, a scenario that encourages central banks to raise interest rates or hold them “higher for longer”, which diminishes the appeal of non-yielding assets, such as Gold.
Meanwhile, investors await the Federal Reserve’s (Fed) monetary policy, which will be announced at 18:00 GMT. The Fed is certain to leave interest rates unchanged in the range of 3.50%-3.75% for the third meeting in a row, according to the CME FedWatch tool. The US central bank is expected to warn about upside inflation and downside economic risks in the wake of elevated energy prices.
Investors will look for cues regarding the Fed’s monetary policy outlook in the monetary policy statement and Fed Chair Jerome Powell’s press conference. The CME FedWatch tool shows that the Fed will keep interest rates at their current levels by the year-end.
Gold technical analysis
In the four-hour chart, XAU/USD holds below the 20-period exponential moving average (EMA) at $4,639.62, keeping the near-term bias bearish as recent rebounds have failed to reclaim this dynamic supply zone.
The Relative Strength Index (RSI) hovers near 32, suggesting persistent downside pressure, although the approach toward oversold territory hints that selling momentum could start to moderate if price stabilizes.
On the topside, initial resistance is aligned with the 20-period EMA around $4,640, and a sustained break above this barrier would be needed to ease the current bearish tone and open the door toward higher consolidation levels. Looking down, XAU/USD is vulnerable near $4,560; and a break below the same would expose it to $4,500.
(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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