Gold Price Forecast: XAU/USD is showing signs of hesitation above $4.300
- XAU/USD is looking for direction above $4,300 amid a stronger US Dollar.
- Investors are focusing on US CPI data for more clues about the Fed's easing calendar.
- Gold price action is forming a symmetrical triangle pattern.
Gold (XAU/USD) is posting marginal gains on Wednesday, but price action remains contained within previous ranges. Upside attempts remain capped below all-time highs at $4,350, and bears are contained above the $4,260-$4,270 so far. The doji candles in the daily chart highlight a hesitant market.
The US Dollar Index (DXY) is trimming some losses on Wednesday, and that is limiting Gold upside attempts so far. US data released on Tuesday maintain fears about a deteriorating labour market intact, but traders are waiting for Thursday’s US Consumer Prices Index report to reassess their expectations of further interest rate cuts by the Fed.
Technical Analysis: Gold is forming a triangle pattern around $4,300
XAU/USD trades at $4,316.73, little changed daily, with recent price action forming a triangle pattern roughly around the $4,300 level, with an ascending parallel channel framing the broader uptrend. Triangles are considered continuation patterns and, in this case, they would signal a positive outcome.
Technical indicators, however, show mixed signals. The Moving Average Convergence Divergence (MACD) remains below zero with the histogram contracting, suggesting fading bearish pressure, while the Relative Strength Index (RSI) prints 57.77, maintaining a modest bullish tone.
Immediate resistance is at the top of the triangle, at $4,340 area and the December 12 and 15 highs, at $4,350 area. Further up, the top of the ascending channel, now around $4,385, emerges as the next target. Supports are at the $4,300 intraday low, ahead of the triangle bottom of $4,280 and the base of the channel, near $4,240.
(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.