Gold (XAU/USD) attracts some buyers for the third straight day, hitting an over one-week high during the Asian session on Monday, though it lacks follow-through. Crude oil prices declined amid hopes that the Russia-Ukraine energy ceasefire deal will ease global fuel shortages, reducing inflationary risks. This comes on top of the recent minor pullback in US bond yields from multi-year highs and weighs on the US Dollar at the start of a new week, supporting the precious metal. However, the US Federal Reserve's (Fed) hawkish outlook and the US-Iran standoff limit USD losses, capping gains for the commodity.
Technical Analysis
The precious metal currently trades near a confluence hurdle – comprising the 23.6% Fibonacci retracement and the 100-period Simple Moving Average (SMA) on the 4-hour chart. Despite this overhead supply, momentum is constructive, with the Relative Strength Index (RSI) at 63.9 edging toward overbought territory and the Moving Average Convergence Divergence (MACD) remaining positive and elevated. This, in turn, suggests that bulls are attempting to extend the rebound but still need a clean break above the immediate ceiling to regain firmer control.
Hence, a sustained move beyond the $4,215-$4,220 confluence would open the way toward the next Fibonacci resistance cluster at $4,303 and then $4,378, ahead of higher retracement barriers at $4,452, $4,558 and the cycle-high area near $4,693. On the downside, initial structural support emerges only much lower at the $4,100 mark ahead of the Fibonacci anchor around $4,063. A failure to defend that floor would signal that the broader downtrend is resuming and set the stage for a slide further below the $4,000 psychological mark.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fundamental Analysis
Dollar upside risks linger as energy pullback cools bond rout
Brown Brothers Harriman’s Elias Haddad observes that a “modest pullback in energy prices eased the global bond sell-off and took some steam out of the USD rally.” However, he cautions that “US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside,” suggesting that any pause in Dollar strength may prove temporary.
Market participants have been pricing out the possibility of a rate hike at the late-October Fed meeting, though expectations for a 25-basis-point increase in December remain firmly on the table. According to CME Group's FedWatch Tool, traders are currently assigning around an 85% probability that the US central bank will raise borrowing costs again by the year-end. The bets were lifted by the September FOMC meeting minutes, released last Wednesday, which confirmed that policymakers still view inflation as the dominant threat to macroeconomic stability and back the case for further policy tightening.
In the Middle East, the Iran-backed Houthi group in Yemen escalated its campaign against Saudi Arabia, targeting Riyadh’s King Khalid International Airport with a mix of ballistic and cruise missiles, as well as drones over the weekend. The deadly attacks drew a Saudi vow of retaliation, with US President Donald Trump raising the possibility of joining strikes on the group and resuming attacks on Iran. Furthermore, Iran’s top security official declared Washington’s response to its proposal for reopening the strategic Strait of Hormuz insufficient. This keeps the geopolitical risk premium firmly in play.
The fundamental backdrop might hold back USD bears from placing aggressive bets. Traders might also opt to wait on the sidelines ahead of the release of US inflation figures – Producer Price Index (PPI) and Consumer Price Index (CPI) on Wednesday and Thursday, respectively. Apart from this, Fed Chair Kevin Warsh's speech at the annual meetings of the IMF and World Bank in Bangkok on Friday would drive the USD and the non-yielding Gold. Nevertheless, the aforementioned factors make it prudent to wait for strong follow-through buying before confirming that the XAU/USD has formed a near-term bottom.
XAU/USD 4-hour chart
XAU/USD Forecast Poll
1 Week
- 0%
- Bullish
- 33%
- Bearish
- 67%
- Sideways
1 Month
- 67%
- Bullish
- 0%
- Bearish
- 33%
- Sideways
1 Quarter
- 71%
- Bullish
- 0%
- Bearish
- 29%
- Sideways
Gold (XAU/USD)
In the Forex market, Gold functions as a currency. The particularity of Gold is that it is traded against the United States Dollar (USD), with the internationally accepted code for gold being XAU.
Known as a safe-haven asset, Gold is expected to appreciate in periods of market volatility and economic uncertainty. 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.
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. The United States is the country that holds the biggest resources of Gold in the world.
The XAU/USD pair tells the trader how many US Dollars are needed to purchase one troy ounce of Gold.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold prices escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher borrowing costs usually weigh on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars. A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Organizations that influence XAU/USD
- WGC (World Gold Council) is the market development organization for the Gold industry. Its aim is to stimulate and sustain demand for the precious metal.
- LBMA (London Bullion Market Association) is an organization whose members participate in this wholesale over-the-counter market for trading Gold and Silver. It is loosely overseen by the Bank of England. Most LBMA members are major international banks, bullion dealers, and refiners.
- COMEX (Commodity Exchange) is the primary market for trading metals. The COMEX merged with the New York Mercantile Exchange (NYMEX) in 1994 and joined the CME Group in 2008.
- CGSE (Chinese Gold and Silver Exchange Society) is an organization of Gold trading firms in Hong Kong that are participants of the Chinese Gold and Silver Exchange, the first exchange in Hong Kong.
- Central banks like the Federal Reserve (Fed), the European Central Bank (ECB) or the People's Bank of China (PBoC) significantly influence Gold prices through their monetary policies.
People that influence XAU/USD
- Neal Froneman, the World Gold Council's Chairman.
- Scott Bessent, the US Treasury Secretary.
- Xi Jinping, President of the People's Republic of China.
- The London Bullion Market Association members.
Circumstances that influence XAU/USD
The main variables traders should monitor to understand Gold's position are:
- Demand and supply: The balance between global Gold demand and its availability impacts its price.
- Economic uncertainty and currency devaluation: Gold is widely known as a safe-haven asset for investors in periods of economic uncertainty or when a currency faces devaluation.
- Practical applications: The use of Gold in technology innovations, jewelry manufacturing and other industrial applications.
Assets that influence XAU/USD
- Currencies: The US Dollar (USD) and the Euro (EUR) are the primary currencies influencing Gold prices. Other important currency pairs include EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD, and USD/CAD.
- Commodities: Silver and Gold are the most important precious metal commodities.
- Bonds: Influential fixed-income securities include the German Bund (a federal government-issued bond) and the US Treasury Note (T-Note).
- Indices: Key indices related to Gold and mining include the HUI (NYSE Arca Gold BUGS), the XAU (Philadelphia Gold and Silver Index) and the GDM (NYSE Arca Gold Miners Index).
- Exchanges: The most important stock exchanges for Gold are the New York Mercantile Exchange (COMEX), the Chicago Board of Trade, the Euronext/LIFFE, the London Bullion Market, the Tokyo Commodity Exchange, the Bolsa der Mercadorias e Futuros and the Korea Futures Exchange.