Gold Price Forecast: XAU/USD needs to clear $2,042 for a sustained recovery


  • Gold price rebounds from three-week lows as the focus shifts to US inflation data. 
  • The US Dollar struggles with US Treasury bond yields amid mixed Fedspeak and a better mood.
  • Gold price eyes a meaningful recovery above the 21-day SMA at $2,043 amid a Bull Cross.  

Gold price is back in the green early Tuesday, building on the turnaround from three-week lows of $2,017 set on Monday. The US Dollar (USD) is holding its pullback amid a better market mood and a modest uptick in the US Treasury bond yields.

Gold price benefits from softer US inflation expectations

Risk sentiment remains in a firmer spot, as Asian equities track the Wall Street tech rally, endorsed by renewed hopes of aggressive interest rate cuts by the US Federal Reserve (Fed) later this year.

The dovish Fed expectations were reinforced after the New York Fed's latest Survey of Consumer Expectations showed Monday that US consumers' projection of inflation over the short run fell to the lowest level in nearly three years in December.

The US Dollar snapped its winning run and pulled back sharply from three-week highs against its major rival currencies, tracking the sell-off in the US Treasury bond yields on softer US inflation expectations-induced bets for a slew of Fed rate cuts this year.

Markets are currently pricing in about 61% odds of a March Fed rate cut, up from a 55% chance seen following the release of the upbeat US Nonfarm Payrolls (NFP) report. Friday’s NFP data showed that the US economy added 216K jobs in December, beating the market forecast of a 170K increase.

The US Dollar rallied to fresh multi-week highs on strong US labor market report and less dovish Fed commentaries, weighing negatively on the Gold price. Fed Governor Michelle Bowman said on Monday that “inflation could fall further with policy rate held steady for some time.” Atlanta Federal Reserve (Fed) President Raphael Bostic said that he expects two 25 basis points (bps) rate cuts by year-end 2024.

All eyes now turn to Thursday’s US Consumer Price Index (CPI) data, which will help revertebrate the market’s pricing for the Fed rate cuts, impacting the US Dollar and Gold price valuations. The US CPI is forecast to rise at an annual pace of 3.2% in December, up slightly from a 3.1% increase in November. The Core CPI inflation is set to decline to 3.8% YoY in the reported period versus 4.0% in November.

In the meantime, the broader market sentiment and the Fed expectations will continue to influence the price direction of the US Dollar-denominated Gold.

Gold price technical analysis: Daily chart

The near-term technical outlook for Gold price remains slightly in favor of buyers but acceptance above the 21-day Simple Moving Average (SMA) at $2,042 holds the key.

The next upside target for Gold price is envisioned at Friday’s high of $2,054, above which doors reopen for a test of the $2,100 barrier.

The 100-day Simple Moving Average (SMA) closed above the 200-day SMA on Friday, validating an impending Bull Cross.

The 14-day Relative Strength Index (RSI) indicator is looking to recapture the midline, suggesting that a meaningful Gold price recovery could be in the offing.

On the downside, the initial support is seen at the $2,015 confluence, where the 50-day SMA and the previous day’s low converge.

A daily closing below the latter is critical to resuming the downtrend toward the $2,000 mark.

(This story was corrected on January 9 at 07:00 GMT to say that "the dovish Fed expectations were reinforced after the New York Fed's latest Survey of Consumer Expectations showed Monday, not Tuesday)

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD stays on the back foot and trades slightly below 1.0400 following the earlier recovery attempt. In the absence of high-tier data releases, the negative shift seen in risk mood helps the US Dollar gather strength and forces the pair to stretch lower. 

EUR/USD News
GBP/USD declines toward 1.2500 on renewed USD strength

GBP/USD declines toward 1.2500 on renewed USD strength

GBP/USD loses its traction and declines to the 1.2500 area in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as investors await US Consumer Confidence data for December.

GBP/USD News
Gold drops below $2,620 as US bond yields edge higher

Gold drops below $2,620 as US bond yields edge higher

After starting the week in a quiet manner, Gold comes under bearish pressure and retreats below $2,620. The benchmark 10-year US Treasury bond yield stays in positive territory above 4.5%, making it difficult for XAU/USD gain traction.

Gold News
Bitcoin fails to recover as Metaplanet buys the dip

Bitcoin fails to recover as Metaplanet buys the dip

Bitcoin hovers around $95,000 on Monday after losing the progress made during Friday’s relief rally. The largest cryptocurrency hit a new all-time high at $108,353 on Tuesday but this was followed by a steep correction after the US Fed signaled fewer interest-rate cuts than previously anticipated for 2025. 

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures