- Gold forecast: Gold has suffered one of its sharpest sell-offs in years Friday; bounces off lows
- Volatility remains extreme, with both gold and silver seeing aggressive intraday swings
- The outlook now hinges on US data, the dollar, and whether safe-haven demand continues to fade
The price of gold fell initially as one should have expected to see after Friday’s big plunge, but they have since bounced back and the day’s losses have been trimmed sharply. However, it is far too early to suggest gold has found a bottom yet. Indeed, I expect heightened volatility to continue for a while yet as the prior one-direction trade is clearly over.
From euphoric highs to brutal reality check
The gold forecast has shifted dramatically over the past few sessions. After racing to fresh all-time highs last week, gold suffered a violent reversal towards the end of last week. That volatility carried through to today’s session, with prices plunging by almost 10% at one point before finding some tentative support. While both gold and silver managed to bounce off their lows once European trading got underway this morning, the damage has clearly been done from a technical perspective.
Gold briefly dipped as low as $4,400 before rebounding towards the $4,750–$4,800 region, while silver staged an even more dramatic recovery after collapsing earlier in the session. That bounce, however, looks more like a classic volatility-driven rebound than a genuine trend reversal. In fact, this kind of sharp two-way price action often appears near turning points, and that’s something traders should be very mindful of in the days ahead.
What made Friday’s move particularly notable was the sheer scale of the sell-off. Gold recorded its largest intraday percentage drop since the 2008 financial crisis, while silver experienced what was effectively a historic collapse, falling more than 25% by the close. When markets move like this, I don’t think any sane investors will be willing to hold their positions for too long in hoping to catch the next up leg. So, I wouldn’t be surprised if gold turned lower again from here as we head deeper into the US session.
Gold forecast: Has the fundamental backdrop started to turn?
From a macro perspective, several of the key drivers that pushed gold higher are now starting to fade. One of the biggest bullish themes had been concerns about US monetary policy credibility, especially with political pressure on the Federal Reserve and persistent calls for rate cuts. That narrative shifted abruptly after Donald Trump appointed Kevin Warsh as the new Fed chair, a move interpreted by markets as more hawkish than expected.
The immediate result was a sharp rebound in the US dollar, which had been heavily oversold. That alone is a problem for gold. A stronger dollar typically acts as headwinds for precious metals, and if this greenback recovery extends beyond a short-term bounce, it could put further downside pressure on gold prices.
Geopolitics also looks slightly less supportive for gold prices. The risk premium around a potential US-Iran conflict has eased after more conciliatory rhetoric from Washington. Oil prices have fallen as a result, and any further de-escalation reduces the appeal of safe-haven assets like gold. In other words, some of the fear that fuelled the rally has started to unwind.
US data now holds the key
The next big test for the gold forecast will come from US macro data. This week is packed with key releases, including ISM surveys, JOLTS job openings and, most importantly, Friday’s US non-farm payrolls report. Ahead of those, we saw the ISM manufacturing PMI data come in stronger, showing US manufacturing activity expanded at the fastest pace since 2022. This kept the dollar on the front foot.
If the week’s other data, particularly employment figures, come in strong, it would reinforce the idea that the US economy remains resilient, pushing rate cut expectations further out and supporting the dollar. That would be a clear negative for gold. On the other hand, if employment data disappoints, markets may quickly revive expectations for aggressive rate cuts in the second quarter, which could reignite bullish momentum for precious metals.
So in many ways, gold is now hostage to the data.
Gold technical analysis: Trend damage is significant
From a technical standpoint, the picture has clearly deteriorated. The break below the psychological $5,000 level is a major bearish signal, especially given the size of the drop below this hurdle.
Gold has now found temporary support in the $4,350–$4,550 zone, an area that combines previous resistance with a rising short-term trend line. That’s an important region, but it’s far too early to call this a bottom. After moves of this magnitude, markets usually need time to consolidate, and there is often further downside follow-through before any sustainable recovery emerges.
For now, the path of least resistance remains lower. The next key psychological level to watch on the downside is $4,500, while a much deeper pullback cannot be ruled out if selling pressure resumes.
On the upside, any rallies are likely to face resistance around $4,800, $4,895, then $5,000, and finally $5,100. These levels now act as major supply zones where bearish traders may look to sell into strength.
So, the short-term gold forecast has turned bearish, which should pave the way for more volatility. While long-term structural arguments for gold remain intact, the market looks vulnerable after such an extreme, crowded rally. Unless safe-haven fears return or US data significantly weakens, gold may struggle to regain its bullish momentum in the near term. For now, rallies look more like selling opportunities than the start of a fresh leg higher.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
