Gold Price Forecast: XAU/USD extends its struggle below $4,200
- Gold clings to recovery gains near $4,150 early Monday, maintaining last week’s range.
- US Dollar reverts to 17-month highs despite receding Oil prices, Treasury yields, and Fed rate hike bets.
- Gold’s technical picture appears skewed to the downside in the near term.
Gold has once again found buyers at lower levels at the start of the new week on Monday, attempting another run to recapture the $4,200 level on a sustained basis.
Gold rebounds but not out of the woods yet
In doing so, Gold is testing offers near the $4,150 psychological level, as retreating Oil prices ease inflation fears and strengthen the case for the US Federal Reserve (Fed) keeping interest rates steady at its monetary policy meeting later this month.
The recent downside in Oil prices was fuelled by expectations of oil supply restoration, particularly after G7 countries agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves and pledged to refrain from energy export restrictions after pressure from US President Donald Trump.
Additionally, shipping data showed Monday that crude oil exports from the Middle East exceeded pre-war levels in four of the seven days of the final week of September, despite attacks on vessels passing through the Strait of Hormuz.
Reports of more Oil now in the market than previously feared countered news of Yemen's Iran-backed Houthis attacks on Saudi Aramco sites in Riyadh and the Khurais area over the weekend and OPEC+ maintaining its November output targets.
Meanwhile, the US Nonfarm Payrolls (NFP) disappointment on Friday helped markets almost price out an October Fed rate hike, with the odds for a pause now above 80%, according to the CME Group’s FedWatch Tool.
Headline NFP increased by 29,000 in September, just under a third of the 90,000 rise economists had expected. The August number was downwardly revised to 133,000 from 162,000 prior.
This dovish Fed repricing helps non-yielding assets such as Gold recover some ground amid a pullback in US Treasury bond yields. However, the ongoing US Dollar (USD) upward trajectory remains a headwind for the bright metal as geopolitical uncertainty remains elevated.
According to TD Securities, the latest US payrolls release, with softer headline figures, average hourly earnings and prior revisions, is only "marginally weighing on the USD." Against this backdrop, the bank stresses that "it is hard for us to see persistent bullish USD signals from the US data/ Fed channel alone." As a result, TD’s FX strategists say they now have "a greater conviction to fade the USD rallies than to chase the USD to a new high," preferring to treat any strength in the Dollar as an opportunity to reduce exposure rather than position for fresh upside.
Over the weekend, Iranian parliament speaker Mohammad Bagher Ghalibaf said: “The Strait of Hormuz will not be opened until our seven conditions—based on the Islamabad Memorandum—are met.”
The Pentagon said that the US military evacuated a dozen B-1 bombers from the RAF Fairford airbase in the United Kingdom (UK) over the weekend after attack threats from Iran, per Axios.
Furthermore, the Russian Defense Ministry threatened that it would intensify attacks on Ukraine’s military and industrial facilities following President Volodymyr Zelenskyy's pledge to double down on strikes against oil refineries.
With looming geopolitical risks, Oil prices could revive their uptrend, stoking inflation concerns and once again weighing on Gold if there is a resurgence in US Treasury bond yields.
That said, focus will be on US ISM Services PMI data and speeches from Fed policymakers for reaffirmation of the chances of a Fed rate hike later this month, which could significantly impact USD dynamics and Gold price action.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,136.75, keeping a bearish near-term tone as it holds beneath the main moving averages. The 100-day simple moving average (SMA) at $4,274.80, the 50-day SMA at $4,327.92 and the 200-day SMA at $4,532.80 all sit above spot, suggesting that recent pullbacks have shifted the bias toward the downside despite the broader uptrend. The Relative Strength Index (14) near 38 hints at lingering negative momentum but stops short of oversold territory, leaving room for further weakness before dip-buying interest is likely to strengthen.
On the topside, initial resistance is located at the 100-day SMA around $4,274.80, followed by the 50-day SMA at $4,327.92 and then the more distant 200-day SMA near $4,532.80, which together define a dense supply zone capping recovery attempts. On the downside, the immediate focus is on whether price can stabilize above the prior pivot region around $4,136.75, with the rising trend-line support coming in lower, near $3,999.52; a clear break of this latter floor would reinforce the bearish bias and open the door to a deeper correction in gold.
(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.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
