Gold (XAU/USD) maintains a moderate bullish tone on Tuesday, extending its rebound from last week’s lows near $4,100, but with resistance at the $4,600 area, halting any upward attempts for now.
The precious metal is drawing some support from a decline in U.S. Treasury yields following comments from U.S. Federal Reserve (Fed) Chairman Jerome Powell, who cooled hopes for immediate interest rate increases by confirming that inflation pressures remain “well anchored” despite higher energy prices.
Additionally, a Wall Street Journal report published on Tuesday shows that US President Donald Trump would tell his aides that he is willing to end the war soon, even if the Strait of Hormuz remains closed. The news provided some risk mitigation, allowing European stocks to rally and leave the US Dollar Index (DXY) stuck below a key resistance level.
Technical Analysis: Gold correction may reach the $5,000 area
XAU/USD is trading at USD 4,556.93, moderately bullish in the compact term. The Relative Strength Index (RSI) is hovering in the mid-50s on the 4-hour charts, showing steady but not drawn-out growth momentum, while the Moving Average Convergence Divergence (MACD) remains positive, suggesting buyers remain in control even as momentum cools from earlier highs.
Recent price action suggests that the XAU/USD downtrend may have hit a short-lived bottom last week, with a higher low on Thursday indicating a potential trend change. With this in mind, this pair may be trading in the CD portion of the Gartley formation, targeting the $5,040 area, previous support turned into resistance on March 16 and 17. Previously, resistance is at the 38.2% Fibonacci retracement level of the March sell-off, at $4,600, and the March 20 high at $4,735 will be a challenge for bulls.
A bearish reaction below the March 26 low of $4,355 would shatter that view and refocus on the year-to-date low of $4,100.
(The technical analysis for this story was written with the lend a hand of an AI tool.)
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and operate in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and secure haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets favor the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A sturdy dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
