Gold Price Forecast: XAU/USD holds above the $4,000 support area

Technical Analysis: XAU/USD's immediate trend remains bearish

The short-term technical picture remains bearish. The pair has depreciated about 3.7% in the previous three trading days and found support at $4,000, but the recovery attempt, so far, is frail. The 4-Hour Relative Strength Index (RSI) has bounced up but keeps moving below the 50 line, and the Moving Average Convergence Divergence (MACD) is printing red bars in the histogram.

The pair maintains its bearish trend intact while below an intraday support on the $4,050 area, which has turned resistance. This resistance leaves the $4,000 level exposed. Further down, the targets are the November 6 low at $3,965 and the November 4 low, in the area of $3,930.

A confirmation above $4.050, on the contrary, would ease bearish pressure and bring Monday’s highs, around $4,100, to the focus, ahead of the November 11 high and November 13 low of $4,170.

(This story was corrected on November 18 at 15:18 GMT to say that the next Fed meting is in December, and not in September as previously reported.)

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.