Gold (XAU/USD) rose for a second day on Friday as falling longer-dated US Treasury yields helped offset the drag from the Federal Reserve’s hawkish move earlier in the week. The metal traded up to around $4,400 after rebounding from one-and-a-half-month lows below $4,250, and it was seeking to end a three-week losing run. The Fed lifted rates by 25 basis points on Wednesday to a 3.75–4% range, while Chair Kevin Warsh reiterated the inflation-fighting stance; markets continued to price further tightening even as the shift in yields supported non-yielding gold.
Technically, XAU/USD has reduced weekly losses but remains below the 200-day simple moving average (SMA) at $4,541. The daily Relative Strength Index (RSI) is just above neutral, while the Moving Average Convergence Divergence (MACD) stays negative. Resistance is seen near $4,450, with a higher band between $4,510 and the 200-day SMA; initial support sits around $4,335, ahead of a broader floor at $4,223–$4,235. Central banks remain major buyers, adding 1,136 tonnes worth about $70bn in 2022, and gold’s price dynamics continue to reflect its inverse relationship with the US dollar and Treasury yields.
Trading Strategy and Technical Outlook
We advise derivative traders to approach gold (XAU/USD) with cautious optimism in the coming weeks as it stabilizes around the $4,400 mark. Although the Federal Reserve recently raised interest rates to the 3.75-4% range, falling Treasury yields have cushioned the precious metal. We should watch for short-term long positions if gold can firmly break above the immediate resistance level of $4,450.
Technically, gold remains below its 200-day simple moving average of $4,541, meaning the broader trend is still technically bearish. Because the daily MACD remains in negative territory, we recommend utilizing risk-defined options strategies, like bull call spreads, to mitigate sudden downturns. If the price slips, we can look to establish long positions near the strong support zone between $4,223 and $4,235.
Central Bank Influence and Dollar Dynamics
We must also keep a close eye on central bank activities, as their demand heavily influences long-term pricing. Historical data from the World Gold Council shows central banks bought a record 1,136 tonnes in 2022, and this persistent institutional buying from emerging markets like China and India continues to support the metal’s floor. This robust official demand suggests that any deep retracements in the coming weeks will likely be met with aggressive buying.
Since gold is priced in US dollars, we must closely monitor the dollar index (DXY) for signs of weakness to confirm our bullish setups. A weakening dollar typically acts as a powerful catalyst, historically driving gold to new heights even during late-stage monetary tightening cycles. Derivative traders should keep position sizes conservative until gold clears the major $4,541 resistance ceiling.
