Gold Price Forecast: XAU/USD hesitates around $3,400, still holds 20-day EMA
- Gold price retraces to near $3,360 as three-day upside move hits pause.
- Traders remain confident of Fed’s interest rate cuts in September.
- US President Trump will announce Fed Kugler’s replacement this week.
Gold price (XAU/USD) corrects to near $3,360.00 on Wednesday after a three-day winning streak. The precious metal retraces even as traders remain increasingly confident that the Federal Reserve (Fed) will resume its monetary-expansion cycle in the September policy meeting.
Lower interest rates by the Fed bode well for non-yielding assets, such as Gold.
Traders raised Fed dovish bets significantly as the United States (US) Nonfarm Payrolls (NFP) report for June has shown signs of a slowdown in the labor demand.
Meanwhile, US President Donald Trump has stated that he will announce Fed Governor Adriana Kugler’s replacement this week. Market experts believe that the entry of Trump’s candidate in the rate-setting committee will favor lower interest rates, given that Trump has criticized the Fed, especially Chairman Jerome Powel, a number of times for supporting a restrictive monetary policy stance.
Also, US President Trump has narrowed list of potential candidates as the successor of Jerome Powell. We’re also looking at the Fed chair, and that’s down to four people right now, Two Kevins and two other people," Trump said in an interview with CNBC on Tuesday. His comments signal that White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh are potential candidates to step in place of Powell.
Gold technical analysis
Gold price trades inside the Symmetrical Triangle formation, which indicates indecisiveness among market participants. The yellow metal oscillates around the 20-day Exponential Moving Average (EMA), which trades near $3,323, indicating a sideways trend.
The 14-day Relative Strength Index (RSI) wobbles inside the 40.00-60.00, suggesting a sharp volatility contraction.
Looking down, the Gold price would fall towards the round-level support of $3,200 and the May 15 low at $3,121, if it breaks below the May 29 low of $3,245
Alternatively, the Gold price will enter an uncharted territory if it breaks above the psychological level of $3,500 decisively. Potential resistances would be $3,550 and $3,600.
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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