Gold (XAU/USD) attracts fresh sellers at the start of a new week and reverses a part of Friday’s strong move up of over $150 from sub-$4,900 levels. The commodity slides back below the $5,000 psychological mark during the Asian session, though the downside potential seems limited amid a combination of supporting factors.
A modest US Dollar (USD) uptick, along with a generally positive risk tone, exerts some downward pressure on the safe-haven bullion. However, geopolitical risks remain in play ahead of the second round of US-Iran nuclear talks this week. In fact, the US has dispatched a second aircraft carrier to the region and is preparing for the possibility of a sustained military campaign if the talks do not succeed. In response, Iran’s Revolutionary Guards have warned that they could retaliate against any US military base in case of strikes on their territory. This, in turn, could act as a tailwind for the Gold price.
Meanwhile, any meaningful USD appreciation still seems elusive amid dovish Federal Reserve (Fed) expectations, which tends to benefit the non-yielding yellow metal. As investors look past last Wednesday’s blowout US Nonfarm Payrolls (NFP) report, softer US consumer inflation figures released on Friday lifted market bets that the US central bank will lower borrowing costs in June. The headline US Consumer Price Index (CPI) rose 0.2%, while the core gauge increased 0.3% last month, which backs the case for further policy easing by the Fed and could help limit the downside for the Gold price.
Furthermore, relatively thin trading volumes on the back of the Presidents Day holiday in the US could further hold back traders from placing aggressive directional bets around the XAU/USD pair. That said, the Fed speak could provide some impetus to the USD and the commodity. The focus, however, will remain glued to the FOMC meeting minutes on Wednesday, which will be looked upon for more cues about the Fed’s rate-cut path. Apart from this, traders will take cues from the global flash PMIs on Friday to grab some meaningful opportunities during the latter part of the week.
XAU/USD 1-hour chart
Gold bears have the upper hand, while below the 100-hour SMA pivotal resistance
The XAU/USD pair’s inability to find acceptance or build on Friday’s move up beyond the 100-period Simple Moving Average (SMA) favors bearish traders. The commodity holds beneath this gauge, which slopes lower and sits near $5,028.40, capping rebounds and preserving a bearish intraday bias. The Moving Average Convergence Divergence (MACD) slips below its signal line and into negative territory, with a widening negative histogram that reinforces downward momentum. The Relative Strength Index (RSI) stands at 45 (neutral), tilting lower and aligning with the soft tone.
Momentum would remain pressured while the XAU/USD pair stays under the declining 100-period SMA, as sub-zero MACD readings and a negative histogram argue for seller control. A recovery attempt would gain traction only if the MACD line crosses back above its signal line and the RSI reclaims 50, as that combination would ease downside pressure and allow a corrective bounce to unfold.
(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.
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