$4,070 area: Gold price forecast as XAU/USD rebound stalls below former support

$4,070 resistance checks XAU/USD rebound from $3,975 lows at former support.
A firmer US Dollar ahead of the Fed decision weighs on precious metals on Wednesday.
Bearish momentum appears to ease, but the broader trend stays negative.

Gold (XAU/USD) trades near $4,050. The metal posts modest losses on Wednesday after its recovery over the previous two days stalled around $4,070, where former support has become resistance. A strengthening US Dollar has taken momentum out of precious metals. With AI stocks recovering, investors can turn their attention to the Federal Reserve (Fed) and its monetary policy decision later in the day.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

With the Fed widely expected to hold the Federal Funds Rate in the 3.75%-4.00% range, attention will centre on Chairman Kevin Warsh’s press release. He is likely to avoid endorsing a specific rate path. However, an explicit commitment to tackling inflationary pressures might suffice to underpin market expectations of a December rate hike.

Technical Analysis: Bearish momentum fades in indicator readings

At $4,047, XAU/USD is consolidating inside a descending parallel channel. Momentum indicators nevertheless point to a neutral trend: the 4-hour Relative Strength Index remains above 50, while the Moving Average Convergence Divergence (MACD) stays positive. These readings suggest sellers are beginning to lose their grip, rather than signalling a clear bullish reversal.

Further gains first face the $4,070 zone, marked by the October 7 and 14 lows. This resistance blocks the route to the channel ceiling, currently around $4,125, followed by the October 20 and 21 highs near $4,150.

For declines, the psychological $4,000 zone continues to provide significant support. Below that, sellers are also expected to face a test in the area spanning the late June lows at $3,940 and the July range floor between $3,960 and $3,970.

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

Gold: Key questions answered

Gold investment: What attracts buyers?

Widely used both to preserve value and facilitate exchange, Gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now broadly regarded as a safe-haven asset and therefore a good investment during periods of turmoil. Its independence from any particular issuer or government also underpins its widespread appeal as a hedge against inflation and currency depreciation.

Gold holdings: Who are the largest buyers?

No group holds more Gold than central banks. To shore up their currencies during unsettled periods, they typically diversify reserves and purchase Gold, bolstering perceptions of economic and currency strength. Substantial Gold reserves can reinforce confidence in a country’s solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes in 2022, worth around $70 billion. That marked the largest annual purchase on record. Emerging-market central banks, including those in China, India and Turkey, are rapidly expanding their Gold reserves.

Gold correlations: How do other assets interact?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold moves inversely to them. Dollar depreciation typically supports Gold, allowing investors and central banks to diversify their holdings during turbulent periods. Risk assets also tend to move in the opposite direction to Gold. Equity market gains generally put pressure on the metal, whereas selling in riskier markets tends to support it.

Gold prices: What drives movements?

A broad set of influences can shift Gold prices. Its safe-haven appeal means geopolitical instability or concern over a severe recession can trigger a rapid rise. Because Gold generates no yield, lower interest rates tend to support it, while more expensive borrowing generally weighs on the metal. Even so, the US Dollar (USD) drives most price movements, as Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices; a weaker Dollar is more likely to lift them.