$4,000 area: XAU/USD rebounds but bears retain control | Gold Price Forecast

$4,030: XAU/USD gives up earlier gains after fresh three-month low of $3,986
Precious metals find some support as US Treasury yields fall sharply and hopes of Fed tightening fade.
Gold's rebound faces a ceiling as Oil prices trade at multi-month highs.

Gold (XAU/USD) trades just below $4,030 on Friday. The daily chart shows little change after a rebound from 3-month lows around $4,000. A steep fall in US Treasury yields is lending precious metals some support. Gains remain constrained, however, as fresh highs in Oil prices force global central banks towards more restrictive monetary policies.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A 15 basis points fall on Thursday took the benchmark US 10-year note yield to its steepest daily decline since 2023. Mounting concerns over an AI bubble prompted a flight to safety into US Government yields.

Long-term Treasury yields are consequently heading for a three-week decline, relieving pressure on the Federal Reserve (Fed). This gives the Federal Reserve (Fed) room to evaluate the economic effects of September's rate hike, while making non-yielding precious metals more attractive.

Any substantial Gold rebound is nevertheless likely to face persistent pressure from Oil prices. Above $110, Brent Oil has set fresh five-month highs. Earlier in the day, the US benchmark WTI barrel climbed above $100.

Technical Analysis: $4,070 area presents resistance for bulls

At $4,024.42, XAU/USD remains within the descending channel established from the early September high. On the 4-hour chart, however, the Relative Strength Index (RSI) has entered deeply oversold territory. This suggests bearish momentum might be exhausted and a bullish correction should be considered.

The former support zone at $4,070 is likely to provide initial resistance for bulls. Beyond that lie Tuesday's and Wednesday's high near $4,150, followed by the $4,200 to $4,220 zone, where several rallies have stalled in October.

A move below the $4,000 area would likely bring bears up against strong support at the year-to-date lows between $3,960 and $3,941. The lower channel boundary currently sits further down, around $3,925.

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

Gold: key questions answered

What makes Gold an investment asset?

As both a store of value and a medium of exchange, Gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now widely regarded as a safe haven and therefore a good investment in periods of turmoil. Its independence from any particular issuer or government also underpins its widespread role as a hedge against inflation and currency depreciation.

Which buyers hold the most Gold?

The largest holders of Gold are central banks. To underpin their currencies during turbulent periods, they typically diversify reserves and purchase Gold, reinforcing perceptions of economic and currency strength. Large Gold reserves can bolster confidence in a country's solvency. World Gold Council data show that central banks increased their reserves by 1,136 tonnes of Gold in 2022, worth around $70 billion. No higher annual purchase has been recorded. Emerging-economy central banks, including those in China, India and Turkey, are rapidly expanding their Gold reserves.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold is inversely correlated with them. Dollar weakness tends to lift Gold, allowing investors and central banks to diversify holdings during turbulent periods. The metal also has an inverse relationship with risk assets: stock-market gains typically put pressure on Gold prices, whereas selling in riskier markets tends to benefit it.

Which factors drive Gold prices?

A broad set of factors influences Gold prices. Its safe-haven role means geopolitical instability or concerns about a deep recession can send prices sharply higher. Lower interest rates tend to support this non-yielding asset, while more expensive borrowing usually weighs on the metal. Most price moves, however, hinge on the US Dollar (USD), since Gold is dollar-denominated (XAU/USD). Dollar strength generally restrains Gold prices; a weaker Dollar, by contrast, is likely to lift them.