Gold Price Forecast: XAU/USD bounces up, looks to the $4,060 record high

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Gold maintains its bid tone on Thursday, with downside attempts limited at $4,000
Political and fiscal uncertainty in France and Japan keep underpinning demand for precious metals.
The risk-on reaction after the peace deal in Gaza has been short-lived as investors ponder the fragility of the agreement.

Gold’s reversal has been contained above the $4,000 psychological level, and the precious metal appreciates again on Thursday, trading at $4035 at the moment of writing, with the $4,060 record high at a short distance.

Precious metals remain bid on Thursday. The reaction to the peace deal between Israel and Hamas in Gaza has been limited so far, with investors pondering the fragility of the agreement. On the other hand, market expectations of further Fed easing and the uncertain political situation in Japan and France keep undermining demand for traditional safe havens.

Technical Analysis: Consolidating gains above $4,000

From a technical perspective, Gold maintains its bullish trend intact, with bearish attempts held above the $4,000 level. The 4-hour RSI is close but not at overbought levels yet, which suggests that a new test of the $4,060 record high is on the cards.

Further up, the 161.8% Fibonacci extension of the October 2 - 7 rally is at $4,086, and the near-term trendline resistance, in the vicinity of the $4,100 area now, are plausible targets.

Immediate support is at the mentioned $4,000 level (October 8 lows). Below here, the next target is the October 7 low, near $3,940, ahead of the previous resistance, at the $3,895 area (October 1,2, and 3 highs).

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.