Gold Price Forecast: XAU/USD wobbles around $4,250, awaits fresh cues on US-China trade outlook
- Gold price trades sideways around $4,250 as investors seek fresh cues on the US-China trade outlook.
- US President Trump expresses confidence in reaching a consensus with Chinese leader Xi.
- The Fed is almost certain to cut interest rates in the October policy meeting.
Gold price (XAU/USD) trades in a tight range around $4,250.00 during the European trading session on Monday. The precious metal stabilizes after Friday’s corrective move, which pushed it lower from the all-time high of $4,380 to near $4,200.
The yellow faced intense selling pressure on Friday after comments from United States (US) President Donald Trump signaled that an additional 100% tariffs announced by Washington on imports from China will not be sustained for long.
The scenario of easing global trade tensions diminishes the appeal of safe-haven assets, such as Gold.
“High tariffs were not sustainable though it could stand,” Trump said in an interview with Fox Business over the weekend. Trump expressed optimism that he could reach a fair deal with Chinese leader Xi Jinping in the meeting scheduled later this month in October.
Broadly, the outlook of the Gold price is upbeat as traders remain highly confident that the Federal Reserve (Fed) will cut interest rates in the policy meeting later this month. According to the CME FedWatch tool, traders are almost certain that the Fed will reduce interest rates by 25 basis points (bps) to 3.75%-4.00% in the October policy meeting.
Ahead of the Fed’s policy meeting, investors will pay close attention to the US Consumer Price Index (CPI) data for September, which will be released on Friday.
Lower interest rates by the Fed bode well for non-yielding assets, such as Gold.
Gold technical analysis
Gold price corrects from its all-time high near $4,380 posted on Friday. The overall trend of the Gold price remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around $4,011.89. The upward-sloping trendline from the August 22 low around $3,321.50 will act as key support for the Gold price.
The 14-day Relative Strength Index (RSI) stays above 60.00 for a long period, suggesting a strong bullish momentum.
On the upside, the Gold price would struggle to extend its upside above the fresh all-time high of $4,380. Looking down, the psychological level of $4,000 would act as key support.
Gold daily chart
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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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