Gold Price Forecast: XAU/USD holds gains near $4,100 as risk appetite hits the USD

Gold retraces Friday's losses and picks up to levels near $4,100 on Monday
Risk appetite hurt the USD on Monday, with Iran peace talks in progress and Oil prices steady near two-month lows
XAU/USD price action holds above the top of the descending channel from late August highs

Gold (XAU/USD) shows moderate gains on Monday, reversing Friday’s losses, and consolidating last week’s recovery, with price action levels just below $4.100 and last week’s highs, in the $4,150 area on the bulls’ focus. Precious metals are drawing support from a weak US Dollar, as efforts towards a peace deal in the Middle East continue, and Oil prices remain steady near two-month lows.

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The US Dollar is dropping across the board on Monday amid improved risk sentiment, following news reports of ongoing negotiations to reach a peace deal in Iran. US President Trump contributed to improve the market mood as he affirmed on Sunday that it is unlikely that hostilities against the Islamic Republic will resume if talks show progress.

Recent macroeconomic data, however, has been USD supportive. US Nonfarm Payrolls growth overshot expectations by a wide margin in October, paving the path for further Federal Reserve (Fed) tightening in December. Key Fed policymakers also supported that view following the NFP release on Friday. This is likely to keep US Dollar dips contained.

Technical Analysis: Gold bulls break the top of the bearish channel

XAU/USD trades at $4,094, after bouncing above the upper boundary of the downward-trending channel earlier in the day. The broader tone remains capped as spot gold stays well below the 200-day Simple Moving Average (SMA), but the daily Relative Strength Index (14) has stabilized around the 50 level, and the Moving Average Convergence Divergence (MACD) indicator has turned positive, highlighting a growing upside momentum.

Bulls are likely to meet resistance at the mentioned $4,150 area, which capped rallies on Friday. If this level gives way. the next targets are the early October highs around $4,230, and then the mid-September highs near $4,400.

On the downside, initial support is seen at the confluence of the broken trendline, at $ 4,050, Friday's low at $4,030, and the $4,000 psychological level. A bearish reaction below here negates the bullish view and brings the November 3 low near $3,900 and the Channel bottom, now at $3,825, into focus.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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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