Gold (XAUUSD) Price Forecast: Will Dollar Weakness Push Gold Through 50-Day MA?

Gold Finds Support as Yields and Dollar Continue to Slide

Spot Gold (XAUUSD) is trading higher early Thursday but inside yesterday’s range. That tells me traders are waiting. Volume is light and the market needs a catalyst. I’m watching long-term rates, the dollar and Fed policy. The war is in the background but it’s not what’s moving gold right now.

Technical Outlook

I’m seeing a mixed long-term trend at this time. The successful test of the 200-day moving average at $4099.12 on March 23 proved its worth, but that came after the swing chart turned lower. If you measure the minor trend with the 50-day moving average at $4895.71 then it’s down. However, the series of higher-tops and higher-bottoms since the $4099.12 bottom indicates the minor trend is up. This is driving the current momentum.

Despite the mixed trends, my bias is to the upside since the market is trading on the strong side of the long-term retracement zone at $4744.34 to $4541.88. That’s my support. My resistance is the short-term retracement zone at $4850.68 to $5028.04. Inside this zone is the 50-day moving average at $4895.77.

In order to generate a strong upside bias, spot gold has to establish higher support over $4850.68 then overcome the 50-day moving average at $4895.76. If buyers can do this with conviction then look for the surge to continue into the short-term 61.8% level at $5028.04.

Those are my conditions for a rally. My plan will fall apart, however, if the long-term support at $4744.34 fails and sellers re-emerge, setting their sights on $4644.46 then the long-term 61.8% level at $4541.88.

Essentially, the near-term direction of spot gold will be determined by trader reaction to the 50-day moving average at $4895.84.

Yields and Dollar Are Doing the Work

The 10-Year U.S. Treasury yield and the U.S. Dollar Index have both been sliding since early April. That’s the setup gold needed. Lower yields reduce the cost of holding a non-yielding metal. A softer dollar makes gold cheaper for foreign buyers. Both are working in gold’s favor right now.

The yield pullback is tied to easing inflation expectations and growing confidence that the Federal Reserve doesn’t need to keep rates elevated as long as previously thought. That’s a real shift and gold is responding to it. Optimism around a potential U.S.-Iran deal has pushed yields and the dollar lower too. Geopolitical fear coming out of the market and rate expectations shifting at the same time. That’s a strong combination for gold. As long as both keep moving in the same direction, gold stays supported.

More Information in our Economic Calendar.