Gold Price Forecast: XAU/USD recovery stalls below $4,540 amid cautious markets
- Gold bounces up above $4,500 but remains capped below $4,540.
- News of a ceasefire in Lebanon has improved market sentiment and is weighing on the USD.
- XAU/USD remains trading within a range, with key resistance at $4,590.
Gold (XAU/USD) bounces up on Tuesday, retracing Monday's losses and returning to levels beyond $4,500. The precious metal has drawn some support from a ceasefire in Lebanon, although price action remains trapped within previous ranges, with investors awaiting developments from Iran’s war.
Israel and Hezbollah have agreed a partial ceasefire, and US President Donald Trump said that Israel’s Prime Minister Benjamin Netanyahu has frozen his plans to attack Beirut. Investors remain hopeful that a durable peace in the area is still possible, which is keeping the US Dollar Index (DXY) on the back foot on Tuesday, although risk appetite remains subdued, with the US-Iran peace talks stalled and the Strait of Hormuz closed, with no plan to reopen it on sight.
On the macroeconomic front, US manufacturing data revealed healthy business activity in May, and the focus now shifts to the US JOLTS Job Openings. These figures will frame a string of labour releases this week, ending with the key Nonfarm Payrolls report, which is expected to shed some more light on the US Federal Reserve’s (Fed) monetary policy plans.
Technical Analysis: Rangebound consolidation continues
XAU/USD trades at $4,530 after failing to extend gains beyond $4,540 earlier on the day, which leaves price action trapped within recent ranges. The 4-hour Relative Strength Index (RSI) near 55 suggests bullish momentum, with the positive Moving Average Convergence Divergence (MACD) hinting that downside pressure has eased even if bulls lack clear control.
Key resistance remains at $4,590, which has held bulls several times in the second half of May. A break above that zone would expose the confluence of the mid-May lows and the top of the bearish channel from April, at the $4,645 area
Immediate support is seen at Monday's low near $4,445, with additional protection at May's bottom, in the area of $4,370. The base of the bearish channel is now around $4,340.
(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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