Gold Price Forecast: XAU/USD holds gains above $4,600 as bullish bias prevails
- Gold may find the primary resistance at the three-month high of $4,697.07.
- The 14-day Relative Strength Index at 67 shows strong bullish momentum.
- The nine-day EMA of $4,557.72 acts as the primary support.
Gold (XAU/USD) extends its gains for the second successive day, trading around $4,610 during the European hours on Friday. The price of the precious metal is remaining within the ascending channel pattern, suggesting a persistent bullish bias.
The XAU/USD pair is retaining a constructive bullish bias as spot holds above both the nine-period and 50-period Exponential Moving Averages (EMAs), keeping the short- and medium-term trends aligned to the upside. The 14-day Relative Strength Index (RSI) stands around 67, hovering in bullish territory but shy of extreme overbought conditions, which suggests upside momentum is still dominant though increasingly stretched.
Gold price may rise toward the three-month high of $4,697.07, reached on August 25. A break above this level would open the doors for the XAU/USD pair to reach the upper boundary of the ascending channel around $4,850.00.
On the downside, the immediate support appears at the nine-day EMA of $4,557.72, followed by the lower boundary of the ascending channel around $4,500. A break below this confluence support zone would weaken the bullish bias and put downward pressure on the Gold price to test the 50-day EMA at $4,336.84, followed by the three-week low of $4311.04, which was recorded on August 14.
Gold could soften as real yields firm, Oil extends gains
Analysts at Deutsche Bank highlight a firmer backdrop in rates and commodities, noting that the "10y US Real Yield @ 2.34 // 2 bp" and "10y US Breakevens @ 2.33 // 1 bp" both edged higher, alongside a rise in "10y German Breakeven @ 2.13 // 2 bp." Credit markets were broadly steady, with "iTraxx Europe 125 @ 51 // unch," "CDX 125 @ 50 // unch," and "CDX EM @ 98.4 // unch," while financial indices were little moved as "iTraxx Sen Fin @ 54 // unch" and "iTraxx Sub Fin @ 87 // +1" showed only marginal shifts. In commodities and FX, Deutsche Bank points to "WTI Oil^ @ 83.13 // +1.94%" and a slightly softer Euro as "EUR/USD^ @ 1.165 // -0.10%." Equity sentiment in Asia was constructive, with the "NIKKEI @ 66624 // +0.74%" and "Hang Seng @ 25685 // +0.47%," while volatility eased as the "VIX @ 14.51 // -0.70" slipped further. Against this backdrop of rising real yields and stronger Oil, the bank notes that "Gold^ @ 4579 // -0.85%" came under pressure.
(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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