Gold Price Forecast: XAU/USD consolidates with $5,100 on the bull’s focus
- Gold remains capped below $5,100 with downside attempts limited above $5,000.
- A weak US Dollar is keeping precious metals buoyed on Tuesday.
- XAU/USD is forming a potential Gartley pattern, targeting the $5,340 area.
Gold (XAU/USD) shows marginal gains on Tuesday, but downside attempts are limited above the $5,000 psychological level, with the $5,100 resistance area nearby. Precious metals are looking for direction on Tuesday, with US Dollar weakness limiting downside attempts.
The US Dollar Index, which measures the value of the Greenback against six major currencies, depreciated for the third consecutive day. Weak employment figures released last week and comments from White House economic adviser Kevin Hassett warning about slow employment growth in the coming months have boosted speculation about Fed easing and are weighing on the USD.
The focus on Tuesday, however, is on December’s US Retail Sales figures, which are expected to show a moderate slowdown. These numbers, together with Wednesday’s key Nonfarm Payrolls report and Friday's Consumer Price Index (CPI), are likely to set the near-term direction for the US Dollar and precious metals.
Technical Analysis
XAU/USD trades at the $5,050 area, with the upward-trending 100-period Simple Moving Average (SMA) in the 4 hour-chart providing dynamic support, now around to $4,970.
The Moving Average Convergence Divergence (MACD) has eased from recent peaks, suggesting moderating upside momentum, and the Relative Strength Index (RSI) sits at 57, a neutral-to-bullish reading.
The immediate structure remains bullish with the positive indicators endorsing the view that price action is in the C-D leg of a Gartley pattern. This figure aims beyond the February 4 high in the $5,100 area towards the 78.6% Fibonacci retracement level of the late January sell-off, at the $5,340 area
On the downside, below the mentioned SMA at $4,970, the February 6 low, at $4,655 would come into focus. A break of that level invalidates the bullish view.
(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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