Category: Forex News, News
$4,000 remains in sight for XAU/USD buyers
Gold holds the latest uptick to a new all-time high near $3,980 in Tuesday’s Asian trades, as buyers still keep their sights on the key $4,000 barrier.
Gold: The record rally appears uninterrupted
Gold buyers refuse to give up yet even as the US Dollar (USD) sustains the previous turnaround so far this Tuesday.
The Greenback’s strength on the back of the recent sell-off in the Euro (EUR) and the Japanese Yen (JPY), led by the political jolts in France and Japan, continues to cap Gold’s upside.
However, the fundamental backdrop remains supportive of the traditional safe-haven and non-interest-bearing Gold.
The US shutdown extends as the Democrat law to reopen the government failed for the 5th time in the Senate on Monday, as the sticking point continues to remain health care subsidies.
Meanwhile, concerns over a lack of official US economic data publication and increased bets of two Federal Reserve (Fed) interest rate cuts this year keep boosting the demand for the bright metal.
Additionally, sustained Gold buying by global central banks also continues to power the Gold record rally.
The latest data compiled by the World Gold Council (WGC) showed that the central bank Gold buying rebounded in August, citing a 15-tonne increase to the global gold reserves.
According to the People’s Bank of China (PBOC) reported earlier on, China’s Gold holdings totalled 74.06 million fine troy ounces at the end of September, up from 74.02 million in the previous month, as the central bank expanded bullion purchases for the 11th straight month.
Therefore, Gold remains a ‘buy on pullbacks’ trade, in the absence of any bearish factors as such.
Traders will continue to monitor speeches from Fed officials for fresh insights on the US economy and the Fed’s path forward on interest rates.
Gold price technical analysis: Four-hourly chart
As observed on the four-hour chart, the 14-day Relative Strength Index (RSI) is easing from the overbought region, currently near 70.50, suggesting that any pullback could be quickly bought into.
Buyers look to conquer the $3,980 psychological barrier on the way to the $4,000 mark.
Conversely, if a pullback gathers steam, Gold could test the initial support at $3,897, the 21-Simple Moving Average (SMA), below which the 50-SMA at $3,845 could be attacked.
A firm break below that latter will expose the 100-SMA at $3,772.
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.
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