Gold Price Forecast: XAU/USD approaches weekly lows at $3,320
- Gold retraces Wednesday's gains and approaches weekly lows at $3,320.
- A stronger US Dollar amid investors' concerns about the global trade outlook is weighing on Gold.
- XAU/USD needs to break the $3,310-$3,320 to confirm a trend shift.
Gold (XAU/USD) is trading lower on Thursday, weighed by a stronger US Dollar, with risk appetite subdued amid ongoing uncertainty about global trade and rumours about the resignation of the Fed Chair Jerome Powell.
The precious metal retreats from Monday’s highs at $3,375, but price action remains contained within previous ranges. Later today, the release of the US June Retail Sales data and weekly Jobless Claims might give further clues about the impact of Trump’s tariffs on consumption and employment, and give more guidance for the pair.
Technical analysis: The $3,310-$3,320 is an important support area
The XAU/USD technical picture remains messy. The daily chart shows a lack of clear bias, with the RSI wavering back and forth around the 50 level, and price action halfway through the last few months’ trading range.
A look at the 4-hour chart, however, reveals increasing downside pressure, although the pair remains above the support area at $3,310-$3,320, which contains the neckline of a double top at $3,375 and the bottom of the ascending wedge. A confirmation below here would increase pressure towards the July 9 low at $3,285 ahead of the June 29 low, at $3,245
On the flip side, a rebound from current levels would find resistance at the mentioned $3,375 July 14, 16 highs, and the wedge top, at 3,380, ahead of the June 18 and 23 highs, at the $3,400 area.
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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