Gold Price Forecast: XAU/USD stalls at $5,000 with the bullish trend in play

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Gold (XAU/USD) appreciates for the second consecutive month on Monday, favoured by moderate US Dollar (USD) weakness. The yellow metal maintains the immediate bullish trend intact, but so far, is failing to find significant acceptance above the $5,000 psychhological level.

Gold maintains a moderate bid tone but is struggling to extend gains beyond $5,000.
Rising bets of Fed rate cuts are underpinning precious metals' recent gains.
XAU/USD might be in the C-D leg of a harmonic pattern aiming for $5,340.

The US Dollar Index, which measures the USD against a basket of six majors, has accelerated its reversal from last week's highs, and this keeps Gold from falling further. Employment data released in the US last week suggests that markets might have underestimated the downside risks for the labour market, and has brought Federal Reserve rate cuts back to the table.

Technical Analysis: Potential harmonic pattern targeting the $5,340 area

The 4-hour chart shows XAU/USD's near-term upside trend supported above the upward-trending 100-period SMA, now standing around $4,950. The Moving Average Convergence Divergence (MACD) histogram remains positive, although narrowing, and the Relative Strength Index (RSI) is above 50, reinforcing the improving momentum backdrop.

The positive indicators endorse the idea of a Gartley pattern in progress, aiming past the February 4 high, in the $5,100 area, towards the 78.6% Fibonacci retracement of the late January selloff, in the $5,340 area, or the January 29 high, at the $5,450 area.

Immediate support is at the mentioned 100-period SMA. A confirmation below Friday's low, at $4,655 invalidates this view and exposes February's bottom, near $4,400.

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

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.