$4,000: Gold battles to defend support after steep sell-off

More than 3% remains Gold’s projected weekly loss. The metal is attempting to rebound from its lowest levels since July.
Friday’s US PMI and consumer sentiment releases are in focus before the Fed’s interest rate decision next week.
Below key moving averages, XAU/USD retains a bearish bias as RSI approaches oversold levels.

Gold (XAU/USD) is trading near $4,028 at the time of writing. Despite Friday’s attempted recovery above $4,000, the metal remains set for a weekly decline of more than 3%. During Asian trading, it touched $3,986, its weakest level since July. Buyers have returned on the dip following Thursday’s steep 2.81% fall.

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Thursday brought what Rabobank analysts call “a brutal day for markets on Thursday,” with the S&P 500 down “1.2% to $7663, dragged lower by the Philadelphia Stock Exchange Semiconductor index, which marched its way to the lowest level since July of this year.” Government bonds rallied strongly as equities sold off sharply. Rabobank noted that “bad things for equities meant good things for US Treasuries, as the US 10-year yield moved back below 5% for the first time since September, despite higher energy prices, and the 2-year made its way back below 4.75%.”

Several headwinds prevented Gold from gaining on Thursday’s equity decline and lower US Treasury yields. With Middle East tensions supporting energy prices, West Texas Intermediate Oil is trading near five-week highs at around $100 per barrel. These inflationary pressures underpin expectations of interest rates staying higher for longer, raising the opportunity cost of holding the non-yielding metal.

Selling precious metals to offset equity losses may also have been a factor for some traders. Gold’s break beneath the $4,100-$4,200 range, which had largely held since early October, likely prompted additional technical selling.

Rebounds therefore remain exposed to fresh selling, while the US Dollar and Treasury yields are showing signs of stabilising following Thursday’s falls. Up 0.14%, the US Dollar Index (DXY) is trading around 101.78. The index measures the Greenback against a basket of six major currencies. Meanwhile, the benchmark 10-year US Treasury yield is approximately 4.99%.

Friday’s remaining data agenda includes October’s preliminary S&P Global Purchasing Managers’ Index (PMI) readings. Traders will also assess the University of Michigan’s final consumer sentiment survey and its inflation expectations measures.

Next week’s Fed decision in focus

Following September’s 25 basis points (bps) increase, the US central bank is widely expected to keep interest rates steady. Policymakers’ assessment of persistent inflation risks will be scrutinised alongside concerns that weaker AI-related investment could hurt economic growth. Gold’s rebound could be constrained by any indication that a further rate increase in December remains an option.

$4,000 under threat: Gold technical indicators favour sellers

Trading below all major moving averages on the daily chart, XAU/USD continues its correction with a bearish short-term outlook. Momentum remains weak: the Relative Strength Index (RSI) is near 35 and moving towards oversold territory, while the Moving Average Convergence Divergence (MACD) indicator remains negative below zero. These readings suggest sellers still have the upper hand. The Average Directional Index (ADX), edging higher around 24, indicates that the trend is gradually gaining strength.

Any recovery first faces psychological resistance at $4,100, then a horizontal barrier at $4,200. The latter strengthens the significance of the nearby 100-day Simple Moving Average (SMA) at $4,224 as a recovery hurdle. Further up, the 50-day SMA at $4,302 stands between prices and the $4,400 area. The broader bearish structure remains capped by the 200-day SMA at $4,509.

If the psychological $4,000 threshold fails to hold, losses could deepen towards initial support at $3,950 and then the $3,900 area. A lasting break beneath $3,900 could clear the way for another leg lower towards $3,800.

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

Gold: frequently asked questions

What attracts investors to Gold?

As a widely used store of value and medium of exchange, Gold has held an important place throughout human history. Beyond its lustre and use in jewellery, the precious metal is now broadly regarded as a safe-haven asset, making it a favoured investment in periods of turbulence. Its independence from any particular issuer or government also supports its widespread role as a hedge against inflation and currency depreciation.

Which buyers hold the largest Gold reserves?

The largest holders of Gold are central banks. To support their currencies during unsettled periods, they typically diversify reserves and purchase Gold, bolstering perceptions of economic and currency strength. Substantial Gold holdings can reinforce confidence in a country’s solvency. According to World Gold Council data, central banks increased their reserves by 1,136 tonnes in 2022, worth approximately $70 billion. That marked the largest annual purchase on record. 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, major reserve and safe-haven assets, have an inverse correlation with Gold. A weaker Dollar generally supports Gold, allowing investors and central banks to diversify holdings during turbulent periods. Risk assets also tend to move in the opposite direction to Gold. Stock-market gains typically put pressure on the metal’s price, whereas selling in riskier markets tends to support it.

Which factors drive Gold prices?

Gold responds to a broad range of influences. Its safe-haven appeal can drive sharp price increases during geopolitical instability or when fears of a deep recession emerge. Because it generates no yield, Gold generally benefits from lower interest rates, while more expensive borrowing usually puts pressure on the metal. Most price movements nevertheless hinge on the US Dollar (USD), since Gold is denominated in dollars (XAU/USD). Dollar strength tends to restrain Gold prices; Dollar weakness is more likely to lift them.