Gold price (XAU/USD) is down 0.61% to near $4,350 during the European trading session on Monday. The yellow metal is under pressure as the US Dollar (USD) remains broadly firm amid solid expectations that the Federal Reserve (Fed) will hike interest rates again this year.
Technical Analysis
Bias: In the daily chart, XAU/USD trades at $4,349.73, maintaining a bearish near-term bias as it faces selling pressure above the 20-day exponential moving average (EMA), which is roughly at $4,366.80.
Momentum: The recent recovery attempts lack follow-through, and the Relative Strength Index (RSI) around 49 tilts slightly negative, suggesting that upside momentum remains fragile while price action stays capped beneath this short-term trend gauge.
Resistance: On the topside, initial resistance is defined by the 20-day EMA near $4,366.80, and a sustained break above this barrier would be needed to ease the immediate downside pressure and open the way for a more constructive recovery towards $4,500.
Support: Looking down, the precious metal could extend its decline towards the July high near $4,200.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fundamental Analysis
At press time, the US Dollar Index (DXY), which gauges the Greenbacks value against six major currency peers, is up 0.1% to near 100.30. The USD Index is close to its over 50-day high of 100.56 posted on Friday.
Technically, a higher US Dollar makes the Gold price an unfavorable risk-reward bet for investors.
Last week, the Fed raised interest rates by 25 basis points (bps) to the 3.75%-4.00% range and signaled at least one more this year through the dot plot.
Economists at NBC Economics and Strategy argue that the updated dot plot pointing to “relatively broad support for more restrictive monetary policy for a significant period of time.” In their view, the Fed “doesn’t see a return to a 3.5%-3.75% range until the end of 2029,” underscoring a higher-for-longer policy bias.
The scenario of higher-for-longer United States (US) interest rates bodes poorly for non-yielding assets, such as Gold.
XAU/USD Forecast Poll
1 Week
- 33%
- Bullish
- 67%
- Bearish
- 0%
- Sideways
1 Month
- 67%
- Bullish
- 0%
- Bearish
- 33%
- Sideways
1 Quarter
- 100%
- Bullish
- 0%
- Bearish
- 0%
- 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.