Gold (XAU/USD) attracts some dip-buyers during the Asian session on Wednesday, stalling the previous day's retracement slide from the $4,435 region, or the highest level since June 5. The commodity, however, remains below the $4,400 mark as traders await key US inflation figures for fresh cues about the US Federal Reserve's (Fed) future policy path before placing fresh directional bets on the non-yielding yellow metal.
Technical Analysis
The metal is hovering around the 100-day Simple Moving Average (SMA), though it remains capped beneath a dense band of overhead resistance, starting with the 50.0% Fibonacci retracement of the April-June fall and extending towards the 200-day SMA at $4,500.51, suggesting that bulls need a clear break higher to regain control.
On the downside, immediate support is provided by the 100-day SMA at $4,388.33, with further cushions at the 38.2% retracement at $4,298.48 and the 23.6% level at $4,161.40. A break below the latter could expose the structural floor around $3,939.81.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fundamental Analysis
Friday's weak US Nonfarm Payrolls (NFP) report pointed to signs of a cooling labor market and undermined the case for the Fed to raise interest rates. Investors, however, remain worried about inflation risks stemming from volatile energy prices, which might force the US central bank to adopt a more hawkish stance. In fact, crude oil prices climbed to a one-and-a-half-week high on Tuesday after an advisor to Iran’s Supreme Leader Mojtaba Khamenei said that the Strait of Hormuz will not be opened until the US meets Tehran's demands.
Adding to this, Iran-backed Houthi rebels in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb, particularly targeting Saudi-linked ships. This led to increased war-risk premiums, which act as a tailwind for crude oil prices and should benefit the safe-haven Greenback. Furthermore, hawkish Fed expectations remain supportive of elevated US Treasury bond yields, further underpinning the buck and warranting caution before positioning for an extension of the XAU/USD pair's strong move up witnessed over the past week or so.
Analysts at Deutsche Bank highlighted that the sharp move in energy markets added to pressure on rates, noting that Brent crude “(+4.99% to $87.72/bbl) rallied past $85/bbl for the first time this month, whilst the 10yr Treasury yield (+6.2bps) unwound the entirety of its decline after Friday’s payrolls with September Fed hike pricing returning to above 50% ahead of tomorrow's CPI.” According to the bank, “that backdrop of higher oil prices and rate hike speculation meant it was a tricky session for sovereign bonds around the world,” with a “consistent picture of yields moving closer back to the highs from late-July.”
XAU/USD daily chart
XAU/USD Forecast Poll
1 Week
- 50%
- Bullish
- 0%
- Bearish
- 50%
- Sideways
1 Month
- 20%
- Bullish
- 60%
- Bearish
- 20%
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1 Quarter
- 50%
- Bullish
- 33%
- Bearish
- 17%
- 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.