Gold Price Forecast: XAU/USD Holds Immediate Support Below $4,000 As US Dollar Corrects

• Gold price recovers to near $4,050 as the US Dollar corrects.

• The odds of the Fed delivering at least two interest rate hikes this year have slightly diminished.

• A decline in oil prices has anchored global inflation expectations.

Gold price (XAU/USD) trades 0.6% higher to near $4,050 during the European trading session on Friday. The precious metal recovers after discovering support near $3,960 in the past two trading days. The yellow metal gets some relief after a long underperformance as the US Dollar (USD) loses steam, with traders reconsidering hawkish Federal Reserve (Fed) bets.

Technically, a correction in the US Dollar brings favorable risk-reward opportunities for the Gold price.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% lower to near 101.20. The DXY has corrected from its yearly high of 101.80 posted on Wednesday.

According to the CME FedWatch tool, the odds of the Fed delivering at least two interest rate hikes this year are 41.7%, down from 50.2% seen a week ago.

Traders have trimmed hawkish Fed bets slightly as oil prices have returned to pre-war levels due to an increase in energy flows through the Strait of Hormuz, a scenario that would anchor global inflation expectations.

Meanwhile, the US core Personal Consumption Expenditure Price Index (PCE), which is the Fed’s preferred inflation gauge, accelerated to 3.4% Year-on-Year (YoY) in May, as expected, from 3.3% in April.

Gold technical analysis

XAU/USD trades higher at around $4,050, but maintains a bearish near-term bias as price holds below the 20-period exponential moving average (EMA) at $4,232.13. The metal has been retreating from recent highs, and the EMA now acts as overhead supply, hinting that rallies could be capped while below this barrier.

The Relative Strength Index (RSI) at 34.63 sits just above oversold territory, suggesting negative momentum persists but with some scope for a corrective bounce.

On the topside, the March 23 low at $4,098.88 is the immediate resistance, which the Gold price needs to break for a mean-reversion move to near the 20-period EMA around $4,232. Looking down, the Gold price could extend its decline towards the October 28 low at $3,886.62 and the September 23 high at $3,791.12 if it drops below the June 24 low at $3,959.51.