Gold Maintains Upside Momentum Around $4,610 Amid Bullish Technical Setup

Gold (XAU/USD) extended its gains for the second consecutive day, trading around $4,610 during European hours on Friday. The precious metal remained within an ascending channel pattern, indicating sustained bullish momentum.

The XAU/USD pair is holding a constructive outlook as spot prices stay above both the nine-period and 50-period Exponential Moving Averages (EMAs), keeping short- and medium-term trends aligned to the upside. The 14-day Relative Strength Index (RSI) stands near 67, remaining in bullish territory but not yet reaching extreme overbought levels, suggesting upside momentum remains dominant though increasingly stretched.

Gold price may advance toward the three-month high of $4,697.07, achieved on August 25. A decisive break above this level could open the path toward the upper boundary of the ascending channel around $4,850.00.

On the downside, immediate support is located at the nine-day EMA around $4,557.72, followed by the lower boundary of the ascending channel near $4,500. A break below this confluence support zone would weaken the bullish bias and exert downward pressure on Gold price, potentially testing the 50-day EMA at $4,336.84 and subsequently the three-week low of $4,311.04 from August 14.

Market Overview: Real Yields Gain, Oil Advances, Gold Faces Pressure

Analysts at Deutsche Bank highlighted a firmer backdrop in rates and commodities, noting that the “10y US Real Yield @ 2.34 // 2 bp” and “10y US Breakevens @ 2.33 // 1 bp” both edged higher, alongside an increase in “10y German Breakeven @ 2.13 // 2 bp.” Credit markets remained broadly steady, with “iTraxx Europe 125 @ 51 // unch,” “CDX 125 @ 50 // unch,” and “CDX EM @ 98.4 // unch,” while financial indices showed minimal movement as “iTraxx Sen Fin @ 54 // unch” and “iTraxx Sub Fin @ 87 // +1” displayed only marginal shifts. In commodities and FX, Deutsche Bank pointed to “WTI Oil^ @ 83.13 // +1.94%” and a slightly softer Euro as “EUR/USD^ @ 1.165 // -0.10%.” Equity sentiment in Asia was constructive, with the “NIKKEI @ 66624 // +0.74%” and “Hang Seng @ 25685 // +0.47%,” while volatility eased as the “VIX @ 14.51 // -0.70” slipped further. Against this backdrop of rising real yields and stronger Oil, the bank noted that “Gold^ @ 4579 // -0.85%” came under pressure.

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

Gold FAQs

Gold has played a key role in human 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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