Gold Price Forecast: XAU/USD pulls back amid cooling safe-haven demand

NEW YORK (March 16) XAU/USD spun in a flat circle on Monday, settling close to 5,000 in a relatively contained session following last week's sharp decline from the highs. Gold has pulled back meaningfully from its spike high near 5,600, reached at the height of the Strait of Hormuz disruption, with the 5,000 round number now acting as the immediate psychological support. Monday's small-bodied candle at this level suggests the market is in a wait-and-see mode rather than committing to further selling.

Spot Gold's retreat from the 5,600 spike high reflects a gradual cooling of the fear premium that drove prices to record levels when the Strait of Hormuz closure removed a significant portion of global seaborne oil supply from the market. With diplomatic channels showing early signs of progress and the initial shock fading, safe-haven flows have moderated, applying downward pressure on Gold alongside falling crude prices. Central bank reserve buying and structural demand from Asian institutions continue to provide a floor, though the pace of inflows has slowed since the panic peak.

The Federal Reserve (Fed) rate decision on Wednesday is the key near-term catalyst, with markets expecting a hold at 3.75%. The accompanying SEP update and Chair Powell's press conference will be closely watched for any shift in the rate path, given the inflationary risk posed by elevated energy prices from the supply disruption. Higher-for-longer rate expectations would pressure Gold by lifting real yields and the US Dollar (USD), while any dovish signal could reignite the rally.

FXStreet