Gold Price Forecast: XAU/USD remains vulnerable, with $4,000 on sight

Technical Analysis: Gold is on a bearish correction from all-time highs

From a technical perspective, a look at the 4-hour charts shows bears in control, as price action corrects lower from all-time highs near $4,400. Upside attempts remained capped well below a previous support level at $4,185 last week, highlighting the bearish momentum.

On the downside, immediate support is at the $4,000 psychological area, where bears were capped on October 22. This level closes the path towards the October 9 and 10 lows, at $3,945, and the 61.8% Fibonacci retracement of the September 18 - October 17 bullish run, a common target for corrections.

Upside attempts remain capped below $4.150 (October 22 and 23 highs), below here, the previous support at the mentioned $4185 area might hold bulls ahead of the all-time high, near $4,380

Further down, the $3945 area, where the pair found support on October 7, 9, and 10, emerges as the next target ahead of the October 2 low, at $3,845. To the upside, the intraday high at the $4,160 area and the October 17 low at $4,185 are closing the path towards the all-time high at $4,380.

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.