Gold Price Forecast: XAU/USD resumes its uptrend to test the $5,100 level
- Gold appreciates amid the US Dollar's weakness and tests resistance at the $5,100 area.
- Weak US Retail Sales and low employment costs added pressure on the USD on Tuesday.
- Investors may wait for the release of the US Nonfarm Payrolls report to place large US Dollar bets.
Gold (XAU/USD) has retraced Tuesday’s lows and is resuming the upside trend from late January lows, with bulls testing resistance around $5,100 at the time of writing. Precious metals are trading higher, favoured by a soft US Dollar on Wednesday, although investors are likely to remain cautious ahead of the release of January’s Nonfarm Payrolls report.
The Greenback is losing ground against its main peers on Wednesday, as the weak Retail Sales and lower labour costs seen on Tuesday provided further reasons for the US Federal Reserve (Fed) to cut interest rates in the coming months.
Today, all eyes will be on the Nonfarm Payrolls report to contrast the poor employment figures seen last week. The market consensus anticipates an increase in net jobs to 70K from December’s 50K, with the Unemployment Rate remaining steady at 4.4% and wage growth moderating.
Technical indicators show an improving bullish momentum
XAU/USD trades a few pips below February's peak, at $5,100, with technical indicators in the 4-hour chart pointing to further appreciation. The 100-period Simple Moving Average (SMA) slopes higher, keeping a bullish near-term bias intact. The Moving Average Convergence Divergence (MACD) remains above zero, and the Relative Strength Index (RSI) has reached 60 in a clear upside trend, highlighting a growing bullish momentum.
The immediate trend remains bullish, and a confirmation above $5,100 would endorse the theory of an ongoing Gartley Pattern, with the prime target at the 78.6% Fibonacci retracement level of the late January sell-off, at the $5,340 area.
To the downside, immediate support is at the confluence of the 50% Fibonacci retracement level and Tuesday's lows, in the area of $4,995, ahead of the February 6 low, at $4,655.
(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.