Gold Price Forecast: XAU/USD accelerates reversal, bears aim for $4,500 area
- Gold extends losses below $4.550 on risk-off markets on Monday.
- Escalating tensions in the Strait of Hormuz have provided a fresh boost to the USD.
- Gold bears are aiming to test support at the $4,500 area.
Gold (XAU/USD) accelerates its downtrend in Monday’s European session, trading right below $4,550 at the moment of writing, with bears aiming for last Thursday’s lows, right above $4,500. The risk-averse market, amid escalating tensions between the US and Iran, has provided additional support to the safe-haven US Dollar and is weighing on precious metals.
US President Donald Trump announced on Monday a plan to free vessels blocked in the Strait of Hormuz, but did not provide details of the operation. Iranian authorities reiterated that the critical waterway will remain closed and that any incursion of the US military in the area would be considered a violation of the ceasefire and responded with “full strength.”
Technical Analysis: Bears aim for the $4,500 area
XAU/USD maintains a bearish near-term bias from mid-April highs, with technical indicators on the 4-hour chart endorsing the negative view. A softer Relative Strength Index (RSI) near 36 and a Moving Average Convergence Divergence (MACD) reading, slipping into negative territory, hint that downside momentum is still dominating rebounds.
Bears are aiming for the support area between the April 29 low, at $4,510, and the late March lows right below $4,500. Further down, the March 26 low at the $4,350 area, and the March 23 low near $4,100 emerge as the next likely target.
Upside attempts, on the other hand, are likely to be tested at Friday's high of $4,660, ahead of the mentioned mid-April highs, below $4,900.
(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.