Gold Price Forecast: XAU/USD appreciates to $4,400 as yields retreat

Gold extends gains for the second consecutive day, turning positive for the week
A moderate reversal of US Treasury yields has offset the negative impact of the Fed's hawkish hike.
XAU/USD is likely to face significant resistance above $4,500

Guillermo Alcala FXStreet

Gold (XAU/USD) extends gains for the second consecutive day on Friday as the pullback in US Treasury yields has offset the negative impact of the hawkish hike delivered by the Federal Reserve (Fed) earlier this week. The precious metal has reached session highs at the $4,400 area, after bouncing from one-and-a-half-month lows below $4,250 earlier this week, aiming to close a three-week losing streak.

The Fed hiked interest rates by 25 basis points to the 3.75-4% band on Wednesday, and Chairman Kevin Warsh reaffirmed the bank’s commitment to fight inflation. These comments boosted market expectations of further rate hikes in the coming months, but also restored confidence in the Fed’s independence, allowing for a reversal in longer-term Treasury yields and providing a fresh boost to yieldless gold.

Technical Analysis: Key resistance lies above $4,500

XAU/USD has pared some losses this week, easing the bearish pressure witnessed in the previous week, but it is not out of the woods yet, as it holds below the 200‑day simple moving average (SMA). The Relative Strength Index (RSI) in the daily chart sits just above neutral, hinting at stabilizing momentum, although the Moving Average Convergence Divergence (MACD) remains in negative territory, which suggests that upside attempts are still frail.

Gold bulls are likely to meet resistance ahead of the $4,450 area, which halted recoveries on September 8, 9 and 10. Key resistance, however, lies in the area between the September 3 high, at $4,510, and the mentioned 200-day SMA, at $4,541.

On the downside, session lows at the $4,335 area might provide some support on bearish reversals, ahead of the key support area between the August 6 and September 16 lows, at $4,223 and $4,235, respectively.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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