Gold (XAU/USD) extends its two-way price moves for the second straight day and trades above $4,650 during the Asian session on Wednesday. The commodity remains within striking distance of its highest level since May 14 as traders keenly await the release of the US Personal Consumption Expenditures (PCE) Price Index for some meaningful impetus. Investors this week will also scrutinize Federal Reserve (Fed) Chair Kevin Warsh's scheduled speech at the Jackson Hole Symposium for more cues about the interest rate path. The outlook, in turn, will drive the US Dollar (USD) and the non-yielding yellow metal.
Technical Analysis
The recent breakout through the $4,500 psychological mark confluence hurdle – comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the March-June decline – was seen as a key trigger for XAU/USD bulls. The subsequent move up, however, struggles to find acceptance above the 50% retracement level, warranting some caution before positioning for any further gains.
Meanwhile, the Relative Strength Index (14) near 72 signals overbought conditions and hints that upside momentum, although strong, could be vulnerable to consolidation. The Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) stays in positive territory, reinforcing the constructive tone despite stretched momentum. Nevertheless, XAU/USD bulls might still wait for a move above $4,700.
A sustained break above the said handle would open the way toward the 61.8% level at $4,856, the 78.6% retracement at $5,104, and the cycle high area around $5,421. On the downside, initial support is seen at the 200-day SMA at $4,522 and the nearby 38.2% Fibo. retracement at $4,508, with deeper pullbacks likely targeting the 23.6% retracement at $4,292 and the structural floor anchored near $3,944.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fundamental Analysis
In the meantime, expectations have shifted toward a policy hold at the upcoming September 15–16 FOMC meeting in the wake of cooling price pressures and a sluggish labor market. Moreover, the US Treasury's buyback strategy leads to a further decline in US bond yields. Meanwhile, two senior officials indicated that the Treasury could use its near $1 trillion General Account to fund its recently announced plans to increase buybacks of longer-term bonds. Furthermore, positive developments surrounding the Middle East crisis weigh on crude oil prices, easing inflation fears and exerting additional pressure on US bond yields. This keeps USD bulls on the defensive and acts as a tailwind for the Gold price.
Crude oil prices dropped to a nearly two-week low after Iran said that it had restarted talks with Oman to manage commercial shipping traffic through the Strait of Hormuz. The countries said they had discussed a joint temporary navigational corridor through the strategic waterway. Adding to this, the US offered Iran sanctions relief and an end to the naval blockade in exchange for reopening the Strait and halting attacks carried out by its regional proxies. This revived hopes for a diplomatic resolution to end the US-Iran war, further denting the Greenback's reserve currency status and supporting the Gold price. Bulls, however, await a move beyond $4,700 before placing fresh bets on the XAU/USD pair.
XAU/USD daily chart
XAU/USD Forecast Poll
1 Week
- 67%
- Bullish
- 0%
- Bearish
- 33%
- Sideways
1 Month
- 14%
- Bullish
- 57%
- Bearish
- 29%
- Sideways
1 Quarter
- 29%
- Bullish
- 43%
- Bearish
- 28%
- 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.