06.07.202611:02 Forex Analysis & Reviews: XAU/USD Price Analysis and Forecast: Gold Traders Remain Cautious

Gold (XAU/USD) remains resilient below the $4,150 level, and the current price action suggests that the intraday correction may be nearing completion after the metal reached its 20-day SMA. Despite the negative short-term sentiment and the end of the previous three-day rally, demand for the U.S. dollar as a safe-haven asset amid geopolitical tensions surrounding the Strait of Hormuz continues to weigh on gold prices.At the same time, easing expectations for further Federal Reserve interest rate hikes are limiting the U.S. dollar's upward potential, which could prevent a more aggressive appreciation of the greenback. Geopolitical tensions in the Strait of Hormuz also remain elevated, while Iran's recent announcement of new transit fees for vessels passing through the strait continues to support the geopolitical risk premium.

Nevertheless, a recent survey by the World Gold Council indicates that central banks continue to increase their gold reserves, viewing the precious metal as a safe-haven asset during periods of financial stress and geopolitical uncertainty. For example, in May, the People's Bank of China (PBOC) increased its gold holdings by another 320,000 ounces, marking the nineteenth consecutive month of reserve growth. In addition, according to the latest reserve report published by the European Central Bank (ECB), gold has officially surpassed U.S. Treasury securities as the world's second-largest official reserve asset by value.

For better trading opportunities, traders should wait for the release of key U.S. economic data, particularly the ISM Services PMI, which could influence demand for the U.S. dollar and, consequently, gold price dynamics.

Therefore, although the current correction in gold prices may prove temporary, the underlying fundamental factors continue to point to the potential for a renewed upward trend. Traders should closely monitor upcoming U.S. economic releases and statements from FOMC members, as they may significantly influence market sentiment in the coming days.

From a technical perspective, holding above the 20-day SMA continues to support the bullish outlook. Although momentum oscillators remain in negative territory, indicating that bears still retain a short-term advantage, the Relative Strength Index (RSI) is approaching the 50 level, while the MACD histogram is contracting in favor of the bulls, suggesting that bearish momentum is fading.

Gold is currently encountering resistance at $4,200. A sustained breakout above this level would open the way toward the 200-day EMA. Conversely, if the price falls below the 20-day SMA, the next support is located at $4,122, near the psychologically important $4,100 level. As long as gold remains above these support levels, bulls are likely to retain enough strength to challenge higher prices.