Gold Price Forecast: XAU/USD extends gains nearing $4,200 as US Dollar struggles

XAU/USD rallies for the second consecutive day and reaches session highs above $4,190.
The US Dollar remains on the defensive amid dovish comments from Fed officials and lower US Treasury yields.
Fed Chair Kevin Warsh praised the economic resilience at the IMF forum but failed to provide any monetary policy guidance.

Gold (XAU/USD) heads north for the second consecutive day on Friday, trading near $4,180, with bulls aiming for the $4,230 area, the top of October’s trading range. Precious metals have been boosted by lower US Treasury yields and dovish comments from Federal Reserve (Fed) officials this week, which have undermined speculative support for the Greenback.

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

US data released on Thursday showed that September's Producer Price Index (PPI) accelerated beyond expectations in September, following an overshoot consumer inflation report in the previous day. Also on Thursday, retail consumption showed a surprising resilience in the face of escalating prices.

The data, however, failed to lift the US Dollar as market expectations of a Fed interest rate hike in October remain low. A string of Fed officials suggested that the bank will stand pat at its next meeting, awaiting more insight into the economic impact of September’s interest rate hike.

The Federal Reserve Chairman, Kevin Warsh, spoke at the International Monetary Fund (IMF) forum in Bangkok earlier on Friday. Warsh praised the resilience of the US economy and reaffirmed the central bank’s commitment to fight inflation, but failed to provide any fresh hints about the bank’s near-term path.

Technical Analysis: Key resistance at the $4,230 area comes into focus

XAU/USD trades at $4,179, maintaining a bullish near-term bias with bulls aiming for the top of the last three weeks' horizontal range, in the $4,230 area. The 4-hour Relative Strength Index (14) is hovering in positive territory near 57, and the Moving Average Convergence Divergence (MACD) remains firmly above zero, hinting at moderate upside pressure.

Gold might find resistance at the $4,200 round area, ahead of the key $4,230 (October 2 high). A successful break of this level confirms a bullish reversal, aiming for the September 25 high at $4,315.

On the downside, initial support is at the intraday low near $4,150 ahead of the range bottom of $4,070. A bearish reaction below here negates the bullish view and increases pressure towards the late July, early August lows around the $4,000 psychological area.

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

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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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