$4,070 Key Support Test: Gold Price Forecast for XAU/USD Amid High Oil Prices

$4,070 marks a near-three-month low tested by XAU/USD in Thursday’s sharp sell-off.
Lower US Treasury yields have provided no net support as surging oil prices offset their positive effect.
A break below $4,070 would put the psychological $4,000 level on bears’ radar.

$4,070 remains intact as Gold (XAU/USD) tests a near-three-month low. Tuesday’s sharp decline takes the metal to the floor of its trading range over the past three weeks. Higher oil prices continue to pressure precious metals on Thursday. The Middle East conflict threatens to become more complicated, while Yemeni Houthi militias persist with attacks on Saudi oilfields.

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Five-month highs near $109.00 are being tested by Brent Oil, while WTI Crude nears $100. The moves follow a New York Times report suggesting that the US and Israel might be considering resuming coordinated strikes on Iran after the US midterm election.

Iran-backed Houthis are also continuing their attacks on Saudi oil infrastructure. Two people were reportedly killed in a drone strike on Aramco’s Shaybah oilfield, reviving fears of supply disruptions. These developments are fuelling the recent rise in crude prices, cancelling out the support that falling US Treasury yields traditionally provide to precious metals.

$4,070 under pressure, $4,000 in focus: Technical analysis

At $4,085.58, XAU/USD sits just above the key support zone near $4,070, which has held back declines since late September. The 4-hour momentum readings reinforce the bearish outlook. The Relative Strength Index (14) is slipping towards the low-30s, while the Moving Average Convergence Divergence (MACD) stays below zero.

If a break below the $4,070 zone is confirmed, the lows of 7 and 14 October would give way to a focus on the late-July and early-August troughs near the psychological $4,000 level. Any recovery, by contrast, is likely to encounter resistance around $4,150, the highs set on Tuesday and Wednesday. Beyond that lie the $4,200 zone, marked by the highs of 13 and 16 October, and the range ceiling near $4,230.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold: Frequently asked questions

Gold investment: What attracts investors?

As a widely used store of value and means of exchange, gold has held an important place throughout human history. Today, its appeal extends beyond its lustre and use in jewellery. Investors widely regard the precious metal as a safe-haven asset, making it a favoured investment during periods of turbulence. Its independence from any single issuer or government also underpins its broad reputation as a hedge against inflation and currency depreciation.

Gold holdings: Who are the largest buyers?

The largest holders of gold are central banks. To support their currencies during turbulent periods, they typically diversify reserves and purchase gold, seeking to strengthen perceptions of their economies and currencies. Substantial gold reserves can bolster confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes of gold in 2022, worth approximately $70 billion. No higher annual purchase has been recorded. Emerging-economy central banks, including those in China, India and Turkey, are rapidly expanding their gold reserves.

Gold correlations: How do other assets compare?

The US Dollar and US Treasuries are major reserve and safe-haven assets, and gold is inversely correlated with both. A weakening Dollar typically supports gold, allowing investors and central banks to diversify their holdings during unsettled periods. Risk assets also tend to move in the opposite direction to gold. Stock-market gains generally put pressure on the metal’s price, whereas selling in riskier markets typically supports it.

Gold prices: What drives movements?

Several factors influence gold prices. Its safe-haven appeal can trigger rapid gains when geopolitical tensions rise or fears of a severe recession intensify. Gold pays no yield, so lower interest rates generally support it, while higher borrowing costs usually weigh on the metal. Most price movements, however, hinge on the US Dollar (USD), since gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain gold prices; a weaker Dollar is likely to lift them.