Gold Price Forecast: XAU/USD recovery halts below previous support around $4,070
- XAU/USD recovery from $3,975 lows meets resistance at a previous support level around $4,070.
- Precious metals are struggling on Wednesday as the US Dollar picks up ahead of the Fed's decision.
- The broader trend remains negative, although bearish momentum seems to be fading
Gold (XAU/USD) shows moderate losses on Wednesday, trading at the $4,.050 area as the previous two days’ recovery was capped at a support-turned-resistance, around $4,070. Precious metals have lost momentum as the US Dollar firms up, with AI stocks recovering, which allows investors to shift their focus to the Federal Reserve (Fed) and its monetary policy decision, due later in the day.
The Fed is widely expected to leave its Federal Funds Rate steady at the 3.75%-4.00% range; thus, the main attraction of the event will be Chairman Kevin Warsh’s press release. Warsh will likely refuse to support any particular rate path, but a clear commitment to fight inflation pressures m¡igh be enough to support market expectations of a December rate hike.
Technical Analysis: Indicators show a waning bearish momentum
XAU/USD trades at $4,047, consolidating within a downward parallel channel yet with momentum indicators showing a neutral trend. The 4-hour Relative Strength Index holds above 50, and the Moving Average Convergence Divergence (MACD) remains positive, which suggests that bears are starting to lose control rather than a clear bullish reversal.
On the topside, the mentioned $4,070 area (October 7 and 14 lows) is closing the path towards the channel top, now around $4,125, and the October 20 and 21 highs, near $4,150.
On the downside, the $4,000 psychological area remains a significant support level. Below here, the area between late June lows at $3,940 and July's range bottom between $3,960 and $3,970 is also expected to test bears,
(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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