Gold (XAUUSD) Price Forecast: Oil Surge Caps Gold Breakout as Inflation Risk Builds

Gold Holds Steady Inside Thursday’s Range as Traders Wait on War Headlines

Spot Gold (XAUUSD) is trading slightly lower at the mid-session on Monday, but holding steady inside Thursday’s price range. This inside move suggests investor indecision and impending volatility. Technically, traders are trapped inside a number of retracement levels that are supporting both bullish and bearish outlooks. Fundamentally, bullish traders are eyeing the ongoing ceasefire negotiations, while bearish traders are worried about an escalation of the fighting between the U.S. and Iran.

Technical Outlook

The main swing chart on the daily chart is indicating a downtrend as evidenced by the lower-top, lower-bottom formation. A trade through $4099.12 will reaffirm the downtrend. A minor top has formed at $4800.80. Taking out this top won’t change the main trend to up, but that move will reaffirm the recent shift in momentum to the upside.

The retracement levels capping gains are the main 50% level at $4744.34, the minor 50% level at $4850.68 and the 61.8% level at $5028.04. The potential support levels are the main 61.8% level at $4541.88 and the minor levels at $4449.96 to $4367.16.

Traders should also note that XAUUSD is also trapped inside the long-term 200-day moving average at $4145.71 and the short-term 50-day moving average at $4943.90.

Despite the downtrend on the swing chart, the recent rally from $4099.12 indicates traders are still in “buy the dip” mode with the 200-day moving average serving as both support and guidance.

It’s easy to see a breakout over $4744.34 leading to a test of $4850.68, followed by $4944.01 and $5028.04. However, with traders buying the dips, it’s hard to suggest selling weakness under $4541.88.

So we’re going to call XAUUSD sideways with a slight upside bias. The good thing for the bulls is that the 50-day MA is edging lower, bringing it closer to breakout status. The 200-day MA is starting to inch higher. The tighter this range gets, the bigger the next move.

Oil Is the Biggest Threat to Gold Right Now

Gold is flat Monday as traders watch the war headlines and wait for any news on the Strait of Hormuz. The war isn’t the problem for gold. It’s oil. The longer the conflict runs, the higher energy prices stay. Higher energy feeds inflation and inflation keeps the Fed from cutting rates.

Fed minutes, PCE and CPI are all on the calendar this week. Rate cuts are off the table right now and that’s keeping a lid on gold.

More Information in our Economic Calendar.