Gold Price Forecast: XAU/USD pierces above key $2,000 level on US Dollar weakness

  • The resurgence of gold price bulls lifts XAU/USD back above the $2,000 level.
  • Gold’s recovery is aided by a new low in US Dollar and Treasury yields.
  • According to a report, central banks should increase their gold reserves because of geopolitical concerns.

The price of XAU/USD has re-broken above $2,000 after dip-buying in the $1,960 area on Thursday started a new leg upward for the precious metal. A lower US dollar and declining Treasury yields aided gold’s upward trend. The movement of the metal may be determined by the announcement of durable goods orders and PMI data later on Friday.

Before recovering, the US dollar drops to a new monthly low.
Without a dominant theme driving price activity, markets continue to function. On the daily chart, the Dollar Index (DXY) has formed a bullish hammer candlestick, suggesting a reversal from March’s severe loss. The index has recovered from fresh monthly lows hit on Thursday in the 101.90 range. But it’s still too early to say without a solid confirmation day that’s encouraging. But, if the US Dollar does begin to reverse higher, it will be detrimental to XAU/USD.

Durable Goods Orders, to be released on Friday at 12:30 GMT, and the US Manufacturing and Services PMI, to be released at 13:45 GMT, are anticipated to have an impact on the US Dollar. At 13:30 GMT, James Bullard of the Federal Reserve is also scheduled to speak; his opinions on inflation and the course of interest rates could have an effect on the exchange rate.

Central banks expand their gold holdings

According to a recent research by the French bank Société Générale, central banks in non-Western regions of the world are “de-Dollarising” due to geopolitical polarisation and diversifying into Gold instead.

“Countries that are not allied with the West will be more willing to distance themselves from the Dollar as long as the Russia-Ukraine conflict continues. According to the research, this will motivate central banks to keep up their substantial gold purchases.

The central banks of non-aligned nations ought to maintain de-dollarizing their holdings and investing in gold (6% of our allocation, unchanged), which will eventually be underpinned by lower real yields, continues Soc Gen.

Gold has gradually retreated after surpassing the important $2,000 mark. At the time of writing, the XAU/USD exchange rate is $1,988. On a medium and short term basis, it is uptrending, favouring bullish wagers. It crossed above the crucial psychological threshold of $2,000 on Thursday for the first time since Monday, when markets erupted after the failure of Credit Suisse. It saw a slight pullback throughout the course of the previous night and is currently in what traders refer to as the “buy zone.”

The momentum indicator Relative Strength Index (RSI), which rises roughly in step with price and has no negative divergence, is sustaining the current rebound environment.

The next move up to the next resistance cap at Monday’s $2,009 highs, where a convergence of technical levels provides a tight ceiling, would be confirmed with a break over Thursday’s high of $2,003, which would aid. The true turning point that would energise bulls to push the uptrend to new heights would be a clear breach and closing above $2,010.