Gold prices have demonstrated resilience in recent trading sessions, recovering from earlier losses to maintain a steady position above $4,800. This recovery takes place against a striking backdrop of accumulation from central banks, most notably from a growing number of emerging economies – including, as examples, China, India, and Turkey. As a result, these central banks flooded their vaults with reserves, adding 1,136 tonnes of gold. This strategic acquisition deal was valued at about $70 billion. As geopolitical tensions surge and as market participants continue to watch for important economic indicators from the United States, gold remains a coveted asset.
On Thursday (XAU/USD), gold recouped losses incurred during the Asian session and was trading towards the $4,925 area. Excluding an act of God, technical indicators are lining up for a big run in the shiny metal’s price. Three major trends are fueling growing optimism and helping to set the general economic mood.
Central Bank Accumulation Drives Demand
The notable surge in gold purchases by central banks reflects a strategic move to bolster reserves amid fluctuating economic conditions. In 2022 alone, central banks collectively acquired over 1,136 tonnes of gold, translating to an investment of roughly $70 billion. Central banks in fast-growing developing economies such as China, India, and Turkey are at the forefront of this trend. Most notably, they are seeking gold as an asset that is much safer during uncertain times.
Emerging economies seem to be prioritizing gold accumulation as a way to diversify their reserves. This move is in line with broader global economic trends and a desire to hedge against currency fluctuations. Many times in the past gold prices have swung dramatically following central banks’ powerful actions that have altered markets. Their work provides strong encouragement for the metal as market forces increasingly change the landscape.
Technical Indicators and Market Sentiment
According to the latest market analysis of XAU/USD pair by Collin Seow, the yellow metal is holding strong above the 100-hour Simple Moving Average (SMA). That SMA is capped at $4,707.80. This SMA has acted as a key support level for gold prices. A prolonged close above this level indicates a bullish sentiment and turns the bias higher for the next trading days.
Moreover, the Fibonacci retracement levels are extremely important in predicting price movement. The 38.2% retracement at $4,754.08 offers significant support initially. On the downside, the 23.6% level at $4,805.79 provides a sturdy cushion to protect the momentum against bearish falls. With gold still holding above these key supports here, the path for recovery looks to remain open.
Additionally, the Moving Average Convergence Divergence (MACD) line for gold is still below the Signal line and under zero. Because of how the current positioning has developed, there is some pretty strong bearish momentum. Countervailing that is the ominous histogram, which shows that this sentiment is becoming less vigorous. Therefore, traders need to be extra cautious as gold continues to tread through these treacherous technical waters.
Economic Factors Influencing Gold Prices
The recent upheaval in gold prices can shrug off signals of large scale economic dislocation. These changes are especially connected to U.S. monetary policy. Futures traders are betting on at least two more cuts by the U.S. Federal Reserve (Fed) in 2026. Such expectations would lower the downside risk for gold. Interest rates affect demand for various types of assets. Lower interest rates increase the relative attractiveness of non-yielding assets such as precious metals.
U.S. President Donald Trump’s bizarre U-turn on Greenland made shockwaves around the world. This shift has reinforced global risk sentiment and weighed on gold’s safe haven investment appeal. With the fears over a trade war subsiding, investors are looking at a more positive economic backdrop. This shift has combined with a stronger USD to give a stronger downward pressure on gold prices.
As sentiment stabilizes and the fear of the decline of global trade ebbs, gold investors might soon be evaluating new avenues for expansion. Near-term market movements will be and have mainly been on ongoing acceptance of prices above an ascending 100-hour SMA. This trend further entrenches the expectation that the path of least resistance is upward.