Gold Price Forecast: XAU/USD sellers remain in control while below 21-day SMA
- Gold extends losses into the third consecutive day on Tuesday after facing rejection once again at $4,200
- US Dollar struggles with recent rebound despite higher Oil prices, geopolitical risks.
- Technically, the path of least resistance appears to the downside for Gold.
Gold is falling for the third straight day on Tuesday, having run into sellers on several occasions at the $4,200 level. The bullion awaits a clear trading impetus amid uncertainty about the US Federal Reserve’s (Fed) interest rate outlook and looming geopolitical risks.
Gold looks south as geopolitical risks lurk
Gold remains defensive while within a month-long range as traders weigh the Fed's monetary policy path beyond the October meeting.
According to CME's FedWatch Tool, market expectations for a hike in December remain at 94%.
The US Dollar (USD) holds its recent uptick, helped by rebounding US Treasury yields and elevated Oil prices, keeping USD-sensitive Gold under pressure.
The Greenback attracted safe-haven flows on Monday as civil unrest in many parts of Europe unnerved investors. Meanwhile, Oil prices resumed their uptrend and refreshed monthly as geopolitical risks between the United States (US) and Iran resurfaced alongside Saudi Arabia and Houthi tensions.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said on Monday that Tehran has not yet completely closed the Strait of Hormuz and it can expand the scope of the blockade to the Bab al-Mandeb Strait and the Suez Canal, per The Tehran Times.
“Yemen's Iran-backed Houthis said on Monday they carried out several attacks against Saudi energy, airport and military targets,” according to Reuters.
Additionally, markets also assessed whether US President Donald Trump’s waiver on Russian diesel exports will actually help contain inflation fears.
They also trade with caution ahead of key earnings results from artificial intelligence (AI) bellwether companies. Results are due from Meta on Wednesday and later in the week from Tesla and chipmakers Lam Research and Texas Instruments, per Reuters.
Looking ahead, Gold remains a ‘sell-on-bounce’ trade amid a bearish daily technical setup and geopolitical risks at play.
Analysts at Societe Generale highlight that, “curiously, gold trades sideways and has not managed at all to capitalise on jitters in equities and credit, and the pullback in US real yields.” They argue that “one explanation is that prices have been previously inflated by inflows and RM buying,” with official sector demand still evident: in its weekly roundup on Friday, the World Gold Council noted that the PBoC bought “23 tonnes of gold in September, the largest since October 2023.” Against this backdrop, Societe Generale concludes that “this would suggest that the upside for prices would be limited and Treasuries remain the go-to refuge.”
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,144.18, keeping a bearish near-term tone as spot holds beneath all major simple moving averages, with the 21-day SMA at $4,180.17, the 100-day SMA at $4,235.25, the 50-day SMA at $4,321.96 and the 200-day SMA at $4,518.09 all acting as overhead supply. The Relative Strength Index (14) around 43.5 reinforces a soft downside bias, showing weak momentum rather than oversold conditions as price drifts away from the mid-range of the recent Fibonacci retracement cycle.
On the topside, initial resistance is seen at the 21-day SMA near $4,180, followed by the 23.6% Fibonacci retracement at $4,216.33 and the 100-day SMA at $4,235.25, which together form a nearby cap. Above that, the 38.2% retracement at $4,308.50 and the 50-day SMA at $4,321.96 mark a higher barrier, ahead of a broader supply band defined by the 50.0% retracement at $4,383.00, the 61.8% level at $4,457.50 and the 200-day SMA at $4,518.09. On the downside, immediate support appears toward the Fibonacci anchor around $4,067.33, with deeper protection at the former trend-line break area at $3,997.77 and the trend-line origin near $3,990.07 if selling pressure extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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.
