Gold Price Forecast: XAU/USD eases below $4,400 as US yields rally
- Gold ticks down below $4,400 after rejection at the $4,450 area.
- Concerns about a re-escalation of the Iran war are boosting demand for the safe-haven US Dollar.
- Key resistance remains at the $4,500 area.
Gold (XAU/USD) shows moderate losses on Tuesday, weighed by higher US Treasury yields and a risk-averse sentiment, which has triggered a mild US Dollar recovery. The Yellow metal trades just below the $4,400 level during the European morning trading session, following rejection above $4,430 but still within the weekly range, above the $4,315 floor.
The safe-haven US Dollar is drawing support from growing concerns about the resumption of hostilities in the Middle East, as the Memorandum of Understanding signed in June expired on Monday, with the peace process stalled. Washington and Tehran have ramped up their threats, with US President Trump threatening to bomb Oman while Iran announced that its military stance has shifted to “fully offensive”
Beyond that, US Treasury yields are rising across the curve, adding pressure on Gold. The US benchmark 10-year yield has reached a one-year high above 4.7%, while the 30-year yield reached fresh 19-year highs above 5.3%.
Technical Analysis: Key resistance remains at $4,500
XAU/USD trades at $4,390, after lacking follow-through above $4,430 earlier on the day. Momentum indicators in the daily chart remain bullish with the Relative Strength Index (14) at 62.94 and the Moving Average Convergence Divergence (MACD) at positive levels, suggesting ongoing upside pressure.
Initial resistance is seen at Thursday's high, around $4,450, but the key resistance remains at the 200-day Simple Moving Average (SMA) just above $4,500. On the downside, a break of Friday's low at $4,317 would expose the August 6 low at $4,223 and a deeper base around the $4,000 level, which capped bears in early August.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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