Gold (XAU/USD) price holds firm on Tuesday, capped on the upside by solid resistance at the 100-day Simple Moving Average (SMA) at $4,328, while broad US Dollar strength and elevated US bond yields weighed on the non-yielding metal. At the time of writing, the XAU/USD pair trades at $4,295, down 0.06%.
Technical Analysis
On the daily chart, XAU/USD maintains a bearish near-term bias as price holds below the 100-day Simple Moving Average (SMA) and the 200-day SMA. The metal is marginally above the 50-day SMA at about $4,275, which offers tentative support, but a soft Relative Strength Index (RSI) around 43 and a negative, declining Moving Average Convergence Divergence (MACD) histogram suggest increasing bearish momentum and leave the broader recovery vulnerable to further downside.
On the topside, initial resistance is aligned with the 100-day SMA at $4,328, ahead of a more substantial cap at the 200-day SMA near $4,539 and the horizontal barrier around $4,700. On the downside, a break below the 50-day SMA at $4,275 would expose the next horizontal floors at $4,150 and $4,000, where buyers are likely to reassess the medium-term trend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fundamental Analysis
XAU/USD stalls beneath key resistance as Fed hike becomes near certainty
The Houthis' attack on the Saudi Arabia East-West Oil pipeline pushed energy prices higher and would shut production of around 7 million barrels a day for at least three to five weeks. Investors fearful of another round of inflation pushed the US 10-year Treasury yield past the 5% threshold to levels not seen in almost 19 years, before stabilizing at exactly 5.00%.
Last week’s inflation figures and geopolitical developments pushed markets to almost fully price in a 25-basis-point rate hike by the Federal Reserve (Fed) to 3.75%-4%, with odds standing at 95%, making bullion less appealing due to its non-yielding properties.
For the October meeting, the odds of a rate hike are 97%, and for December, 99%, according to Prime Terminal.
Given the potential start of a tightening cycle in the US, Gold could resume its downtrend despite a short-term bottom near the 50-day SMA at $4,275.
The US Dollar Index (DXY), which measures the performance of the Greenback against a basket of six currencies, is at 99.66, up 0.19%.
Earlier, the ADP Employment Change 4-week average rose by 16.25K above last week’s print, revised upward to 12.25K.
The central bank bonanza begins with the Federal Reserve monetary policy decision on Wednesday. Next, the Bank of England is expected to keep the Bank Rate at 3.7%, with a 6-3 vote split likely for the third time. On Friday, the Bank of Japan is likely to raise rates by 25 basis points to 1.25%.
This is another reason why bullion prices are under downward pressure. Although it is a strong asset for inflation hedging, increasing global bond yields weaken its attractiveness.
XAU/USD Price Forecast: Gold poised to consolidate further, around $4,300
Price action shows Gold is trapped between the 100- and 50-day SMAs, with the former acting as the first key resistance and the latter the first line of defense for bulls. The Relative Strength Index (RSI), although bearish, does not provide a clear clue of who is winning the battle in the short term. This suggests that further sideways trading lies ahead.
For a bullish breakout, Gold must clear the 100-day SMA at $4,328. Once it has cleared the psychological $4,350, $4,400 is up next, before traders could aim to the $4,500 milestone. If those levels are removed, the 200-day SMA becomes the next supply area at $4,539, ahead of $4,600.
On the flip side, if XAU drops below the 50-day SMA at $4,275, it opens the way to challenge the July 6 high at $4,202, followed by the July 29 swing low of $3,996 under the $4,000 psychological mark.
XAU/USD Forecast Poll
1 Week
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1 Month
- 20%
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- 40%
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1 Quarter
- 60%
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- Sideways
Gold (XAU/USD)
In the Forex market, Gold functions as a currency. The particularity of Gold is that it is traded against the United States Dollar (USD), with the internationally accepted code for gold being XAU.
Known as a safe-haven asset, Gold is expected to appreciate in periods of market volatility and economic uncertainty. 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. The United States is the country that holds the biggest resources of Gold in the world.
The XAU/USD pair tells the trader how many US Dollars are needed to purchase one troy ounce of Gold.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold prices escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher borrowing costs usually weigh on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars. A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Organizations that influence XAU/USD
- WGC (World Gold Council) is the market development organization for the Gold industry. Its aim is to stimulate and sustain demand for the precious metal.
- LBMA (London Bullion Market Association) is an organization whose members participate in this wholesale over-the-counter market for trading Gold and Silver. It is loosely overseen by the Bank of England. Most LBMA members are major international banks, bullion dealers, and refiners.
- COMEX (Commodity Exchange) is the primary market for trading metals. The COMEX merged with the New York Mercantile Exchange (NYMEX) in 1994 and joined the CME Group in 2008.
- CGSE (Chinese Gold and Silver Exchange Society) is an organization of Gold trading firms in Hong Kong that are participants of the Chinese Gold and Silver Exchange, the first exchange in Hong Kong.
- Central banks like the Federal Reserve (Fed), the European Central Bank (ECB) or the People's Bank of China (PBoC) significantly influence Gold prices through their monetary policies.
People that influence XAU/USD
- Neal Froneman, the World Gold Council's Chairman.
- Scott Bessent, the US Treasury Secretary.
- Xi Jinping, President of the People's Republic of China.
- The London Bullion Market Association members.
Circumstances that influence XAU/USD
The main variables traders should monitor to understand Gold's position are:
- Demand and supply: The balance between global Gold demand and its availability impacts its price.
- Economic uncertainty and currency devaluation: Gold is widely known as a safe-haven asset for investors in periods of economic uncertainty or when a currency faces devaluation.
- Practical applications: The use of Gold in technology innovations, jewelry manufacturing and other industrial applications.
Assets that influence XAU/USD
- Currencies: The US Dollar (USD) and the Euro (EUR) are the primary currencies influencing Gold prices. Other important currency pairs include EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD, and USD/CAD.
- Commodities: Silver and Gold are the most important precious metal commodities.
- Bonds: Influential fixed-income securities include the German Bund (a federal government-issued bond) and the US Treasury Note (T-Note).
- Indices: Key indices related to Gold and mining include the HUI (NYSE Arca Gold BUGS), the XAU (Philadelphia Gold and Silver Index) and the GDM (NYSE Arca Gold Miners Index).
- Exchanges: The most important stock exchanges for Gold are the New York Mercantile Exchange (COMEX), the Chicago Board of Trade, the Euronext/LIFFE, the London Bullion Market, the Tokyo Commodity Exchange, the Bolsa der Mercadorias e Futuros and the Korea Futures Exchange.