Gold Price Forecast: XAU/USD declines to near $4,450 as safe-haven demand eases

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Gold price (XAU/USD) declines to near $4,450 during the early Asian trading hours on Thursday. The precious metal loses momentum as traders book profits after a recent rally. Later on Thursday, the weekly US Initial Jobless Claims data will be released.

Gold price loses ground to around $4,450 in Thursday’s early Asian session.
Demand for safe-haven assets cools after geopolitical tension, weighing on the Gold price.
Traders will closely monitor the US December jobs data on Friday for fresh impetus.

Traders began to put geopolitical concerns on the back burner following the shocking US capture of Venezuelan President Nicolas Maduro over the weekend. Markets might turn cautious later in the day ahead of the release of key US economic data this week. “We’re viewing today’s pullback as general profit taking after that recent surge,” said David Meger, director of metals trading at High Ridge Futures.

The US employment report for December will be closely watched on Friday, as it might offer some hints about the interest rate path. The US economy is expected to see 60,000 job additions in December, while the Unemployment Rate is projected to tick lower to 4.5% during the same period.

If the reports show a weaker-than-expected outcome, this will support the case for US Federal Reserve (Fed) easing, which underpins the Gold price. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

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.