Gold Price Forecast: XAU/USD slides below 20-day EMA as Israel-Iran call ceasefire
- Gold price is down over 1% to near $3,320 as the Israel-Iran ceasefire diminishes safe-haven demand.
- Fed Bowman supports interest rate cut in July amid growing labor market risks.
- The US Dollar sumps on Israel-Iran ceasefire and Fed Bowman’s dovish commentary.
Gold price (XAU/USD) plummets to near $3,320 during the European trading session on Tuesday. The yellow metal faces a sharp selling pressure as safe-haven assets are underperforming after the announcement of a ceasefire between Israel and Iran.
United States (US) President Donald Trump has stated in a post on Truth.Social that the two Middle East nations have agreed to stopping the 12-day long aerial war. “The ceasefire is now in effect. Please do not violate it!" Trump wrote.
Meanwhile, Israeli Prime Minister Benjamin Netanyahu has warned its defence forces will respond forcefully if Iran violates the truce.
However, investors expect the Gold price to get supported by a dramatic change in the Federal Reserve’s (Fed) stance on the monetary policy outlook. Fed Vice Chair Michelle Bowman stated in a gathering in Prague on Monday that monetary policy adjustments are becoming appropriate amid growing job market risks and expectations that the tariff policy announced by Donald Trump will have limited impact on inflation.
Should inflation pressures remain contained, I [Michelle] would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market,” Bowman said.
Lower interest rates by the Fed bodes well for non-yielding assets, such as Gold. Meanwhile, Fed’s dovish stance on the monetary policy outlook and easing geopolitical tensions have weighed heavily on the US Dollar (USD).
Gold technical analysis
Gold price trades in an Ascending Triangle formation on a daily timeframe, which indicates volatility contraction. The horizontal resistance of the above-mentioned chart pattern is plotted from the April 22 high around $3,500, while the upward-sloping trendline is placed from the April 7 low of $2,957.
The precious metal slides below the 20-day Exponential Moving Average (EMA), suggesting that the near-term trend has become uncertain.
The 14-day Relative Strength Index (RSI) drops below 50.00, indicating that the momentum has shifted to the downside.
Looking up, the Gold price would enter in an unchartered territory after breaking above the psychological level of $3,500 decisively. Potential resistances would be $3,550 and $3,600.
Alternatively, a downside move by the Gold price below the May 29 low of $3,245 would drag it towards the round-level support of $3,200, followed by the May 15 low at $3,121.
Gold daily chart
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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