Gold Price Forecast: XAU/USD holds above the $4,000 support area
Gold has bounced up from $4,000 but remains capped below a previous support, at $4.050.
A steady US Dollar in cautious markets is acting as a headwind for Gold's recovery.
US ADP employment and Factory Orders might set the US Dollar's direction later today.
Gold (XAU/USD) reversal from highs near $4,250 reached last week extended to the $4,000 psychological level earlier on Tuesday. The pair has bounced up during the European trading session but remains below a previous support area in the $4,050 area so far.
The risk-off market mood is providing some support to the precious metal on Tuesday, although the US Dollar (USD) remains firm, underpinned by fading hopes of Federal Reserve (Fed) easing in September, which is acting as a headwind for Gold.
Technical Analysis: XAU/USD's immediate trend remains bearish
The short-term technical picture remains bearish. The pair has depreciated about 3.7% in the previous three trading days and found support at $4,000, but the recovery attempt, so far, is frail. The 4-Hour Relative Strength Index (RSI) has bounced up but keeps moving below the 50 line, and the Moving Average Convergence Divergence (MACD) is printing red bars in the histogram.
The pair maintains its bearish trend intact while below an intraday support on the $4,050 area, which has turned resistance. This resistance leaves the $4,000 level exposed. Further down, the targets are the November 6 low at $3,965 and the November 4 low, in the area of $3,930.
A confirmation above $4.050, on the contrary, would ease bearish pressure and bring Monday’s highs, around $4,100 to the focus, ahead of the November 11 high and November 13 low of $4,170.
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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