Gold Price Forecast: XAU/USD holds near $4,700 despite high US yields
- Gold ticks lower for the second consecutive day but remains within range, around $4,700.
- Higher US Treasury yields are weighing on precious metals on Wednesday.
- Investors are likely to wait for the outcome of the Trump-Xi meeting to make decisions.
Gold (XAU/USD) ticks lower for the second consecutive day on Wednesday, but remains steady, halfway through the weekly trading range, trading a few pips below $4,700 at the time of writing. The precious metal is holding up quite well amid the rally in US Treasury yields, although the upside momentum witnessed last week has vanished.
Precious metals are hesitant on Wednesday following hotter-than-expected US Consumer Price Index figures released on Tuesday. Data from April revealed that consumer prices accelerated to a 3.8% yearly pace, from 3.3% in March, which practically discards any further interest rate cut by the Federal Reserve.
Investors, however, remain cautious on Wednesday, awaiting news from US President Trump’s visit to China. He is likely to seek the support from Chinese President Xi Jinping to solve the stalemate in Iran, which might blunt his demands on trade issues. Xi, in turn, is likely to bring Taiwan's status to the table. The outcome of the meeting might set the tone for financial markets through the end of the week.
Technical Analysis: Looking for direction around $4,700
XAU/USD shows a consolidative bias after last week's rally from the $4,500 area, with momentum indicators suggesting an incipient bearish pressure. The 4-hour Relative Strength Index (RSI) is wavering around 50, while a slightly negative Moving Average Convergence Divergence (MACD) hints at fading bullish momentum.
Downside attempts remain contained above the recent horizontal floor above weekly lows around the $4,640 area for now. This level is closing the path towards the mentioned lows at $4,500, and the March 26 low, near the $4,345 area.
On the topside, Monday's highs, just above $4,770, are expected to test any potential bullish reaction, ahead of the mid-April highs in the area of $4,880. Further up, the target is the March 17 high, near $5,040.
(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.