Gold Price Forecast: XAU/USD consolidates near the $5,600 record high
- Gold prices consolidate above $5,500 after hitting a fresh record high in the $5,600 area.
- Trump's trade policies, doubts about the Fed's independence, and geopolitical tensions are boosting precious metals.
- XAU/USD rally is overexhausted, yet, supported by solid fundamentals.
Another day, another all-time high for Gold (XAU/USD), which has been breaking records for nine consecutive days, showing a dizzying 20% rally in less than two weeks. The pair remains bid on Thursday, as the US Dollar seems unable to perform any significant recovery. Price action is hovering around $5,535 at the time of writing, with the $5,598 record high in sight.
Gold's rally remains unstoppable, driven mostly by generalised US Dollar weakness. Trump’s erratic trade policy, the contradictory messages about Washington’s Dollar policy, and the continuous attacks on the US Federal Reserve are eroding investors’ confidence in the Grenbeck
If that was not enough, the US president stirred the conflict with Iran on Wednesday, launching a new threat of military action, which was responded to by Tehran. Investors reacted by stepping up demand for safe assets, like Gold.
Technical Analysis
From the technical perspective, there is little new to add. XAU/USD remains steady near all-time highs, after rallying 20% in just a few days, a way overstretched rally by all means, but with solid fundamental drivers.
Technical indicators are at levels consistent with an upcoming bearish correction. Price action has detached from the main Simple Moving Averages, and the Relative Strength Index (RSI) sits near 85, at extremely overbought levels. Bulls, however, are not giving any sign of retreat.
Immediate resistance is at the mentioned high, in the $5.600 area. Further up, the 361.8% Fibonacci extension of the mid-January rally, at $5,810 emmerges as a plausible target. Supports are at the intraday low of $5,545 ahead of another intraday level, at $5,235.
(The technical analysis of this story was written with the help of an AI tool.)
(This story was corrected on January 29 at 12:58 GMT to say that the XAU/USD support is at $5,545, and not at $4,545 as previously stated.)
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.