Gold Price Forecast: Can XAU/USD hold key support at $4,070 as high oil prices test the level?

Sharp selling pressure takes XAU/USD towards $4,070 on Thursday, testing its lowest levels in nearly three months.
Support from lower US Treasury yields has been cancelled out by the surge in Oil prices.
A break below $4,070 would put the psychological $4,000 level on the bears’ radar.

Selling pressure on Gold (XAU/USD) intensifies on Tuesday, taking the metal towards $4,070, the lower end of its trading range over the past three weeks and a low of nearly three months. That level has held so far. Higher Oil prices continue to weigh on precious metals on Thursday, as the Middle East conflict threatens to become more complicated and Yemeni Houthi militias persist with attacks on Saudi oilfields.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Oil markets have moved higher following a New York Times report suggesting that the US and Israel might be considering a resumption of coordinated attacks on Iran after the US midterm election. Brent Oil is challenging five-month highs near $109.00, while WTI Crude is nearing $100.

Saudi Oil infrastructure also remains under attack from the Iran-backed Houthis. Reports that a drone strike on Aramco’s Shaybah Oil field killed two people have revived concerns over supply disruptions. Together, these developments are fuelling the recent rise in Crude prices, cancelling out the support that falling US Treasury yields traditionally provide to precious metals.

Technical Analysis: Will a break of $4,070 put $4,000 in focus for bears?

Bearish momentum remains evident on the 4-hour chart, with the Relative Strength Index (14) sliding towards the low-30s and the Moving Average Convergence Divergence (MACD) holding below zero. XAU/USD is trading at $4,085.58, slightly above the key support zone near $4,070 that has checked declines since late September.

If a break below the $4,070 zone is confirmed (October 7, 14 lows), attention would shift to the late July and early August lows near the psychological $4,000 area. Any recovery, however, is likely to encounter resistance around $4,150, at Tuesday’s and Wednesday’s highs. Beyond that lie the $4,200 area (October 13 and 16 highs) and the upper boundary of the range near $4,230.

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

Gold: Frequently Asked Questions

What makes Gold attractive to investors?

Widely used both as a store of value and as a medium of exchange, Gold has occupied an important place throughout human history. Today, its appeal extends beyond its lustre and use in jewellery: the precious metal is widely regarded as a safe-haven asset, or a sound investment during periods of uncertainty. Because it does not depend on any particular issuer or government, Gold is also widely viewed as a hedge against inflation and currency depreciation.

Which buyers hold the largest Gold reserves?

The largest holders of Gold are central banks. To support their currencies during uncertain periods, they typically diversify their reserves and purchase Gold, seeking to strengthen perceptions of both the economy and the currency. Substantial Gold reserves can reinforce confidence in a country’s solvency. According to World Gold Council data, central banks increased their reserves by 1,136 tonnes of Gold, valued at around $70 billion, in 2022. That represents the largest annual purchase since records began. Among emerging economies, the central banks of China, India and Turkey are rapidly expanding their Gold reserves.

How does Gold move relative to other assets?

Both the US Dollar and US Treasuries are major reserve and safe-haven assets, and Gold is inversely correlated with them. A weaker Dollar generally supports Gold, allowing investors and central banks to diversify their holdings during unsettled periods. An inverse relationship also exists between Gold and risk assets: stock-market gains tend to put pressure on Gold prices, whereas selling in riskier markets generally benefits the precious metal.

Which factors drive Gold prices?

Several factors can influence Gold prices. Its safe-haven appeal means geopolitical instability or concerns about a severe recession can trigger a rapid rise. Since Gold pays no yield, lower interest rates tend to support it, while a higher cost of money usually puts the yellow metal under pressure. Nevertheless, the behaviour of the US Dollar (USD) drives most price movements, as Gold is quoted in dollars (XAU/USD). Dollar strength tends to restrain Gold prices; a softer Dollar, by contrast, is likely to lift them.