Gold (XAU/USD) nurses moderate losses on Friday, trading just above $4,460 at the time of writing, after failing to confirm a move above $4,500 on Thursday.
Precious metals are on the defensive despite growing US Dollar weakness ahead of the US Nonfarm Payrolls release, as geopolitical tensions continue to weigh on risk appetite.
The conflict between the US and Iran remains stalled. The Hezbollah militia rejected the ceasefire plan drawn up by Lebanon and Israel earlier this week, and Israel has continued carrying out attacks on Lebanese targets, pushing back hopes of a negotiated end to the war.
Markets, however, will get some distraction from the war with May’s US Nonfarm Payrolls (NFP) report, due later on Friday. Net jobs are expected to have increased by 85K, following a 115K increase in April, confirming a robust labour market and endorsing the view that the Federal Reserve might hike interest rates if inflation remains high for a long time. The risk is skewed to the upside for the US Dollar.
Technical Analysis: Gold is coming under pressure again
XAU/USD bulls have given up after failing to break resistance above the $4,500 psychological level, although bearish momentum is still weak. The 4-hour Relative Strength Index (RSI) at 46.81 hovers near neutral territory, while the Moving Average Convergence Divergence (MACD) indicator sits marginally negative, which together hint at fading bullish pressure rather than a decisive downside break.
On the downside, support at Wednesday’s lows in the $4,430 area is holding bears so far, guarding the path towards the late-May lows, around $4,365. Upside attempts, on the contrary, will meet resistance at Thursday’s highs, in the area of $4,515, ahead of the May 18 and 29 highs, around $4,590.
(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.
