Gold (XAU/USD) rebounds and gains over 2% on Monday as crude prices drift lower, dragging the US Dollar (USD) lower due to its positive correlation, as elevated energy prices exert pressure on inflation. XAU/USD trades at $3,954 at the time of writing.
Technical Analysis
Despite bouncing off yearly lows, Gold’s trend remains up, even though the Relative Strength Index (RSI) shows buyers are gaining momentum. The XAU/USD pair bounced from below $3,900 to current spot prices, but it remains below the latest cycle low at $3,975, the October 23 low of the day (LOD), which has turned into resistance.
To complete a bullish reversal, buyers must surpass the October 23 LOD followed by the $4,000 psychological level. A breach of the latter will see Gold face a key resistance trendline near $4,050-$4,070, ahead of $4,100.
For a bearish continuation, Gold needs to fall below $3,900. This will expose the October 30 yearly low of $3,870, followed by the April 22, 2025, daily high, turned into support at $3,500.
Fundamental Analysis
XAU/USD surges as falling energy prices and Treasury yields revive bullion demand
Oil prices are collapsing amid growing speculation for a diplomatic exit from the US-Iran conflict. Reports say that Iran’s supreme leader granted “certain authorities” regarding peace talks to President Masoud Pezeshkian. News that US President Donald Trump wants a peaceful resolution improved risk appetite, a headwind for the Greenback, which usually fares well amid high interest-rate scenarios and on its safe-haven appeal.
The US Dollar Index (DXY), which measures the buck’s performance against six currencies, is down 0.27% at 101.68. US Treasury yields also edged lower, with the 10-year yield losing nearly 6 basis points to 4.871%.
In the US, the Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) improved from 54.5 to 55.5 in October, exceeding forecasts of 54.6. The report showed that the Prices Paid sub-component fell from 77.9 to 75.2, while an employment measure cooled during the month.
Even though business activity reached its second-highest reading in more than four years, an indication that the economy is expanding solidly, traders trimmed hawkish bets from a week ago. Money markets see a 75% chance of a rate hike in December, down from 80% a week ago, according to the CME FedWatch Tool.
What is on the US calendar
Traders' focus is on Tuesday’s US midterm elections, Factory Orders, the Job Openings and Labor Turnover Survey (JOLTS) and speeches by Federal Reserve officials.
XAU/USD Forecast Poll
1 Week
- 67%
- Bullish
- 0%
- Bearish
- 33%
- Sideways
1 Month
- 86%
- Bullish
- 0%
- Bearish
- 14%
- Sideways
1 Quarter
- 86%
- Bullish
- 0%
- Bearish
- 14%
- 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.