Gold is down nearly 1.50% so far in Tuesday’s Asian trading, sitting at a fresh seven-month low as the key $3,950 psychological barrier gave way amid a renewed wave of selling.
Gold: Stops triggered, more pain in store
Gold’s underlying bearish momentum regained traction early Tuesday, losing roughly $75 in a matter of a couple of hours.
The sudden crash in the Japanese Yen (JPY) drove the USD/JPY pair to its highest level since 1986, above the 162.00 threshold, potentially triggering automated stop-loss orders in Gold below the $4,000 level once again.
The USD/JPY upsurge injected fresh life into the US Dollar (USD), having extended its previous week’s retreat on Monday amid expectations of a de-escalation in the renewed US-Iran tensions.
The renewed uptick in the Greenback continues to weigh on non-yielding Gold, particularly amid increased bets on the US Federal Reserve’s (Fed) interest rate hikes this year.
Markets project three Fed rate hikes this year and are currently pricing in about a 63% chance of a September lift-off, according to the CME Group’s FedWatch Tool.
In addition, Gold traders remain on edge ahead of the expected US-Iran negotiations in Doha on Tuesday, even as Iran said on Monday that no meeting had been scheduled.
Over the weekend, missiles fired from both sides challenged the interim ceasefire to end the four-month-old war.
Looking ahead, the USD/JPY pair-driven USD price action will continue to influence Gold dynamics as traders await the US JOLTS Job Openings data and fresh US-Iran headlines.
Further on Wednesday, the European Central Bank’s (ECB) annual forum in Sintra, Portugal, will be closely watched when the new Fed Chairman, Kevin Warsh, participates in a key policy panel. This follows a surprisingly hawkish debut from Warsh as the Fed Chair earlier in the month.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $3,962.98. The metal remains under clear bearish pressure, sitting below the 21-day simple moving average (SMA) at $4,213.52 as well as the 50-day, 100-day and 200-day SMAs clustered between roughly $4,440 and $4,660, which together suggest a firmly capped medium-term trend. The Relative Strength Index (14) at 32.22 hovers just above oversold territory, hinting that downside momentum is still dominant but could be nearing exhaustion.
On the topside, initial resistance is located at the 21-day SMA at $4,213.52, ahead of the 50-day SMA at $4,437.66 and the 200-day SMA at $4,480.39, with the 100-day SMA at $4,662.90 marking a more distant barrier that reinforces the broader bearish structure. With no clear moving-average or structural supports visible below the current price in this dataset, any further decline would leave XAU/USD searching for fresh demand levels, while only a sustained recovery above the 21-day SMA would start to ease immediate selling pressure.
(The technical analysis of this story was written with the help of an AI tool.)
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.
