Gold Price Forecast: XAU/USD eases from $4,630 ahead of US CPI release
- Gold eases from record highs at $4,625 but remains above December's peak, at $4560.
- Hawkish Fedspeak provided some footing to the USD on Monday's US Session.
- Investors have cut USD shorts, bracing for a srtong US CPI report.
Gold (XAU/USD) posts moderate losses in a calm trading session on Tuesday, pulling back from all-time highs at $4,630, but still above previous highs in the $4,560 area. A moderate recovery of the US Dollar following hawkish comments by Fed Williams and investors’ cautiousness ahead of the UC CPI release is weighing on precious metals on Tuesday.
Markets are bracing for a moderate uptick in inflation, following the November’s unexpected slowdown. The Headline CPI is expected to have grown at a steady 2.7% year-on-year pace, while core inflation is forecast to accelerate to 2.7% from 2.6% last month. All in all, figures that curb hopes of further Fed easing anytime soon.
Technical analysis: Gold corrects lower within a broader bullish trend
XAU/USD bulls met resistance at the 127.2% Fibonacci extension of the last two weeks' trading range, at the $4,625 area, but the pair remains steady above December's peak at $4,555 so far. The broader bullish structure remains in play with the ascending 100-period Simple Moving Average (SMA) providing dynamic support at the $4,440 area.
Technical indicators are turning lower. The 4-Hour RSI, now at 65, remains in bullish territory, but the longer trend shows a bearish divergence. The Moving Average Convergence Divergence (MACD) line is attempting to cross below the signal line, which would highlight a cooling bullish momentum.
Immediate support is the mentioned December 26 high, at $4,555, ahead of the January 7 high, at the $45000 area, and the mentioned 100-period SMA support near $4,440. Resistances are at Monday's high, at $4625 and the 161.8% Fibonacci retracement of the above-mentioned cycle, at $4,714.
(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.