Gold Price Forecast: XAU/USD slumps to near $4,600 as Trump softens tone on Iran

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Gold price (XAU/USD) tumbles to near $4,605 during the early Asian session on Friday. The precious metal edges lower as the US Initial Jobless Claims data boost the ‌US Dollar. The US December Industrial Production report will be published later on Friday.

Gold price falls to around $4,605 in Friday’s early Asian session.
US Initial Jobless Claims unexpectedly fell, weighing on the USD-denominated Gold price.
US President Trump seems to adopt a wait-and-see posture toward the Iranian protests.

The number of Americans filing new applications for unemployment benefits unexpectedly declined to 198,000 for the week ending January 10, according to the US Department of Labor (DOL) on Thursday. This figure came in lower than the market consensus of 215,000 and was lower than the previous week of 207,000 (revised from 208,000).

"Recent data sort of keeps expectations towards Fed on hold perhaps for the first half of the year, so the dollar index is at a multi-week high and that's providing a bit of a headwind for gold at this point," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Furthermore, easing tensions between the US and Iran undermines traditional safe-haven assets, such as gold, as it generally does well during times of geopolitical and economic uncertainty.

US President Donald Trump said early Thursday that Iran has “no plan for executions,” amid fears for the fate of a detained anti-government protester. Nonetheless, Trump hasn’t taken any options off the table, saying that there will be “grave consequences” if killings continue.

Traders will closely monitor the latest geopolitical developments surrounding the Iranian civil unrest. Any signs of escalating tensions could boost the Gold price in the near term.

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.