Gold’s next move could depend on whether it can break through $4,405
Gold recovered strongly at the end of the week as the selling pressure following the Federal Reserve’s latest rate increase began to fade.
Spot gold rose 0.84% on Friday to close at $4,378.39 an ounce, after trading between a low of $4,334.30 and a high of $4,399.67.
The immediate focus is now on $4,405.59.
A sustained move above this level could bring the next resistance zone between $4,466.14 and $4,520.65 into focus. However, if gold fails to break through resistance and turns lower, sellers could regain control.
For physical gold holders, the broader message is that gold remains in a volatile market where interest rates, bond yields, the US dollar, energy prices and geopolitical uncertainty are all influencing short-term price movements.
Gold recovers as the post-Fed sell-off fades
The Federal Reserve raised interest rates by 25 basis points to 3.75%–4.00%, initially putting pressure on gold.
The selling, however, proved short-lived.
By Friday, crude oil prices had fallen for a third consecutive session, US Treasury yields had eased from the 5% area reached earlier in the week and the US dollar had stopped gaining momentum.
Gold did not necessarily need the Federal Reserve to become more supportive.
Instead, some of the forces that had been pushing gold lower simply stopped getting stronger.
That was enough for buyers to return.
The result was a recovery from $4,334.30 to $4,399.67 during Friday’s session.
$4,405.59 is now the level to watch
From a technical perspective, gold remains within a broader downtrend on the daily chart.
However, short-term momentum has improved.
Gold has moved back above its 50-day moving average, which is currently around $4,288.76, while the recent change in the minor trend has reduced some of the immediate downward pressure.
The first important resistance area is between:
$4,373.05 and $4,405.59
Gold moved into this zone on Friday but was unable to establish a sustained break above it.
A convincing move above $4,405.59 would put the next resistance area between:
$4,466.14 and $4,520.65
Above that sits the 200-day moving average at approximately $4,541.23.
The previous swing high at $4,510.93 is also important because a move above that level would represent a more significant change in the current technical structure.
What happens if gold falls?
The recovery is not yet guaranteed to develop into a larger move higher.
The first level to watch on the downside is $4,373.05.
A move below this level would suggest that Friday’s recovery may have been largely driven by short-term buying rather than a decisive change in the broader trend.
Further support can be found around:
- $4,319.60
- $4,288.76 — 50-day moving average
- $4,235.17 — recent major low
A break below $4,235.17 would place the broader downtrend firmly back in focus.
Oil and inflation remain important
Oil prices have become an important part of the gold story.
Higher energy prices can contribute to inflation expectations, potentially keeping pressure on central banks to maintain or increase interest rates.
That can create headwinds for gold because higher yields increase the opportunity cost of holding a non-interest-bearing asset.
The recent decline in crude has temporarily reduced some of that pressure.
If oil continues to fall, it could give bond yields and the US dollar less support and potentially provide gold with additional breathing room.
However, the relationship can quickly change.
A renewed surge in energy prices could bring inflation concerns back into focus and place renewed pressure on yields and gold.
Geopolitical risk remains in the background
Geopolitical developments also remain an important consideration for precious metals.
Any escalation affecting major energy infrastructure or shipping routes could quickly change the outlook for crude oil, inflation expectations and financial markets.
This is one reason gold can move sharply even when its underlying fundamentals have not changed dramatically.
For investors in physical gold, however, short-term price movements should be viewed differently from the reasons many people hold bullion in the first place.
Physical gold is often held as a long-term store of wealth and as a way of diversifying exposure to currencies, financial markets and monetary policy.
What to watch next
The immediate technical picture can be summarised around a few key levels.
Resistance
$4,405.59 is the first major hurdle.
A sustained break above this level could bring:
$4,466.14–$4,520.65
into focus, followed by the $4,541.23 200-day moving average.
Support
On the downside, the first important level is:
$4,373.05
Below that, traders will be watching:
$4,319.60
$4,288.76 — 50-day moving average
and finally:
$4,235.17
The ability of gold to remain above these levels will help determine whether the latest recovery develops into a larger move or simply represents a temporary rebound following the recent sell-off.
Gold remains a long-term story
Technical analysis can provide useful information about short-term market behaviour, but it is only one part of the gold story.
Gold has been used as money and a store of wealth for thousands of years, and its role today extends beyond short-term trading movements.
For Australians buying physical bullion, the Australian dollar gold price is also important. A movement in the international US dollar gold price does not translate directly into the same percentage movement in Australian dollar terms because the AUD/USD exchange rate also affects the local price.
At FirstGold, our focus is on physical gold and silver, rather than paper exposure to the precious metals market.
Whether gold moves through $4,405, falls back towards support or enters another period of consolidation, the longer-term objective for a physical bullion holder is different from that of a short-term trader.
Gold does not have to rise every day to have a place in a long-term wealth strategy.
For many investors, the value of physical precious metals is the ability to accumulate tangible assets over time rather than attempting to predict every short-term price movement.
Build wealth one gram at a time.
This article is for general information and educational purposes only and does not constitute financial advice. Precious metals prices can be volatile and may rise or fall. Consider your own circumstances and seek independent professional advice before making financial decisions.
