Gold Update: XAU/USD Approaches Historical Highs

Gold has not stopped climbing and has already accumulated gains of more than 3% over the past five trading sessions. In this moment, the price is trying to test the historical high zone around $3,500 per ounce. Buying pressure remains firm, supported by the fact that central bank gold reserves have begun to gain greater relevance compared to U.S. Treasuries, reinforcing the notion that gold is now positioned as the most solid safe-haven asset globally. As long as reserve demand continues and the backdrop of lower interest rates persists, XAU/USD could maintain stronger and more consistent bullish pressure in the near term.

Is Gold in Higher Demand?

Recent data shows that gold has overtaken U.S. Treasuries as the most demanded asset by central banks. For the first time in at least 30 years, central banks now hold close to $4 trillion in gold reserves, surpassing the $3.8 trillion in Treasuries. This shift has become more evident as investors anticipate that Treasuries may deliver lower returns, tied to expectations of a 0.25% rate cut by the Federal Reserve at its upcoming September 17 meeting.

In addition, a survey conducted by the World Gold Council revealed that 72% of central banks expect the proportion of reserves held in gold and foreign currencies to be moderately higher in the next five years. Another 17% expect no change, while 6% anticipate the share could be significantly lower. Meanwhile, 4% believe reserves will be much higher than expected, and less than 1% think they will be moderately lower. This trend underscores the commitment of central banks to continue increasing their exposure to gold, consolidating structural demand for the metal and reinforcing its price performance in the short term.

Source: GoldOrg

This shift is also closely tied to the performance of 10-year U.S. Treasuries, which have weakened, currently yielding around 4.2% with a downward slope. The possibility of lower interest rates from the Fed threatens to further reduce the attractiveness of Treasuries, leaving more space for gold to strengthen its role as the preferred safe-haven asset.

Source: TradingEconomics

With Treasuries losing their appeal and central banks steadily increasing their reserves, gold demand is likely to consolidate further in the short term, sustaining bullish pressure on XAU/USD.

 

How Is Market Confidence Holding Up?

The Fear & Greed Index published by CNN, which measures investor sentiment, is currently sitting at 64 points, in the “greed” zone. However, it has displayed a steady decline in recent sessions, which suggests that the “extreme greed” zone may not be reached in the immediate future.

Source: CNN

Against this backdrop, confidence has remained stable thanks to expectations of lower U.S. interest rates. Still, if the index continues to decline, this could become another factor boosting demand for gold as a safe haven. In this sense, lower readings on the index could be associated with additional buying pressure on gold in the short term.

 

Gold Technical Outlook

Source: StoneX, Tradingview

• Sideways Range Breaks: The sideways structure that had contained gold in recent weeks has been breached, as recent upward moves successfully pushed the price above the $3,400 per ounce barrier. This breakout could pave the way for a more defined directional move in favor of the bullish trend, provided that buying pressure remains steady in the coming sessions.

• RSI: the RSI continues to show a strong bullish impulse, with values above 50, which reflects clear dominance by buyers. However, the line is approaching the overbought area near 70, which could open the door to short-term corrective pullbacks.

• MACD: the MACD histogram is firmly above the 0 line, confirming that short-term moving averages remain in bullish territory. This indicates that momentum remains aligned with a buyer-driven market environment in the short term.

 

Key Levels to Watch:

• $3,500 – Major Resistance: this level marks gold’s historical highs and represents the last major barrier to validate a stronger bullish outlook. A sustained breakout here could open the way for a sharper and more sustained upward trend.

 

• $3,400 – Near-Term Barrier: previously the top of the sideways channel, this level now acts as immediate support against potential short-term corrections.

 

• $3,300 – Critical Support: aligned with the 50-period simple moving average and the Ichimoku cloud, this level could bring gold back into its prior sideways range if retested.

 

Written by Julian Pineda, CFA – Market Analyst

Follow him at: @julianpineda25