Gold Price Forecast: XAU/USD holds gains above $4,700 amid US Dollar weakness
- Gold holds gains above $4,700, on track for a 2.25% weekly gain.
- The US Dollar loses ground despite fresh tensions between the US and Iran.
- XAU/USD technical indicators are showing that upside momentum is fading.
Gold (XAU/USD) holds gains above $4,700 on Friday, supported by a weaker US Dollar, despite the cautious mood in financial markets due to recent fire exchange between the US and Iran and doubts about the fate of a fragile ceasefire. The precious metal is on track for a 2.25% appreciation this week as hopes of a negotiated end to the Middle East war have weighed on the safe-haven US Dollar, although the last few days' rally has stalled below $4,770.
Iran accused the US of targeting an Oil vessel in the Strait of Hormuz and several civilian areas, while the US reported missile and drone attacks on their naval force. US President Donald Trump, however, played down these skirmishes and said that the ceasefire remains standing, while urging Tehran again to sign a deal.
Later on Friday, traders are expected to momentarily shift their gaze from the Middle East to the US April’s Nonfarm Payrolls report. NFP data will be observed from a monetary policy perspective, after the deep divergences seen at last week’s Federal Reserve (Fed) meeting have left investors wondering about the central bank’s next steps.
Technical Analysis: Gold bulls seem to be losing steam
XAU/USD holds a constructive near-term bias, yet with momentum indicators suggesting that upside pressure is waning. The 4-hour Relative Strength Index (RSI) remains in positive territory after pulling back from overbought levels, but the Moving Average Convergence Divergence (MACD) has cooled from prior elevated readings, with the MACD line about to cross below the signal line, a bearish sign.
Recent price action shows the pair picking up from five-week lows, before consolidating around the $4,700 over the last few sessions. Upside attempts remain capped below the $4,765-$4,775 area (April 22 highs and Thursday's peak), which closes the path towards April's peak near $4,900.
On the downside, immediate support is seen at a previous resistance area around $4,650, with a deeper pullback exposing April 29 and May 4 lows right above the $4,500 psychological level.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
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.
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.
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.
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.