Gold Price Forecast: XAU/USD bulls target $4,380 buoyed by lower US yields
- Gold holds gains at $4,270 after hitting resistance at the $4,300 area.
- Lower US Treasury yields amid fading hopes of Fed rate hikes are buoying precious metals this week.
- XAU/USD bulls are targeting mid-June highs in the $4,380 area.
Gold (XAU/USD) consolidates gains after appreciating nearly $200 this week, buoyed by lower US Treasury yields as traders dial down bets of immediate Federal Reserve (Fed) rate hikes. The precious metal trades at $4,270 at the time of writing, after pulling back from $4,300 earlier on Thursday, with bulls aiming for mid-June highs in the $4,380 area.
Analysts at MUFG note that political interference is increasingly being priced into the Dollar. They highlight Wall Street Journal reporting that President Trump has spoken to Fed Chair Warsh “repeatedly” since he took over at the Fed, with “bursts” of calls “several times in a stretch of days, which, in their opinion, “will only reinforce the impression of greater political influence undermining Fed independence.”
Technical Analysis: Gold confirms a trend shift
XAU/USD trades at $4,230, holding gains after breaking above a descending triangle, which suggests that the precious metal is heading through a bullish reversal. Momentum indicators in 4-hour charts show overstretched conditions, but dips are likely to find buyers. Relative Strength Index (14) is entrenched in overbought territory around 77, while the Moving Average Convergence Divergence (MACD) gauge remains firmly positive, which warns about a corrective pause.
On the topside, immediate resistance emerges at session highs in the $4,300, ahead of the June 17 high, around $4,380. Further up, the early June highs,m above $4,500, would come into focus.
Bearish reversals, on the other hand, are likely to be tested at previous highs around $4,200 (June 22, July 6 highs) ahead of the broken trendline resistance, now around $4,130 and Monday's low, near $4,020.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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