Gold Price Forecast: XAU/USD holds above $5,000 with US employment in focus
- Gold appreciates for the second consecutive day and consolidates above $5,000.
- Bulls have been capped below 5,100 resistance, awaiting US Employment figures.
- Technically, the immediate trend remains bullish while above $4,885.
Gold (XAU/USD) is trading higher for the second consecutive day on Wednesday, standing above the $5,000 psychological level, trading at $ 5,050 at the time of writing, with markets calm ahead of the release of the US ADP Employment Change Report, due later on Wednesday.
Precious metals remain weighed by a steady US Dollar, buoyed by the end of a two-day shutdown and the positive reaction to the nomination of Kevin Warsh as the next Fed Chairman. The Greenback's rally seen over the last few days, however, seems stalled. In this context, the ADP is likely to set the near-term direction for the USD, and probably also for Gold.
Technical Analysis: Resistance at $5,100 is holding bulls
The immediate XAU/USD trend remains positive, and technical indicators endorse that view. Price action has returned above the 100-period Simple Moving Average (SMA), the Moving Average Convergence Divergence (MACD) histogram is positive and expanding, and the Relative Strength Index (RSI) prints 55, neutral with a slight bullish tilt.
Upside attempts have been capped ahead of a confluence of resistances, between the January 29 low, at the $5,100 area, and the 61.8% Fibonacci retracement of last week's sell-off, at $5,135. Further up, the next target is the 78.6% Fibonacci retracement, at the $5,330 area.
Immediate support is at the February 3 high of $4,990, and the mentioned 100-period SMA, now at $4,885, a confirmation below here, negates the immediate bullish outlook.
(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.