Gold Price Forecast: XAU/USD hits over two-month low under $4,300 as US yields rally
- Gold extends losses beyond $4,300, dropping more than 4% in the last two trading days.
- Geopolitical tensions and rising bets of Fed interest-rate hikes are hammering precious metals.
- XAU/USD falls below the key 200-day SMA.
Gold (XAU/USD) extends losses on Monday to complete a more than 4% depreciation in the last two trading days. The precious metal has hit $4,268, its lowest price in more than two months, as the safe-haven role has been taken by the US Dollar, which is drawing additional support from higher Treasury yields.
Israel and Iran are ramping up their rhetoric after exchanging missile attacks earlier in the day, adding pressure to an already strained ceasefire. US President Donald Trump said that Israel and Iran “must immediately stop shooting,” but investors remain on edge, wary about an all-out war in the region.
Meanwhile, the bright US Nonfarm Payrolls data seen on Friday, followed by strong services and manufacturing activity data, released earlier in the week, boosted hopes of Federal Reserve (Fed) rate hikes. US Treasury yields jumped, and the Dollar rallied across the board, with investors awaiting the release of US Consumer Price Index figures, due on Wednesday, to confirm those views
Technical Analysis: Gold breaches the 200-day SMA
XAU/USD trades at $4,289, extending a bearish phase after breaching the 200-day SMA, a popular indicator for market analysts, and a self-fulfilling bearish signal. Momentum indicators in the daily chart reinforce the negative tone. The Relative Strength Index (RSI) is hovering near oversold territory around 32, and the Moving Average Convergence Divergence (MACD) line is entrenched below zero, suggesting persistent downside pressure.
On the downside, the precious metal might find support at the channel floor, now around $4,230, ahead of a more meaningful horizontal base at the year-to-date low of near $4,100.
On the topside, the pair is upside attempts are likely to be checked at a previous support between $4,350 and $4,365 (March 28, May 29 lows), which capped bulls earlier on the day. This level is closing the path towards the mentioned 200-day SMA, now around $4,435, and the top of the bearish channel, which would meet the price near Friday's peak, at $4,515.
(The technical analysis of this story was written with the help of an AI tool.)
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.