Gold forecast: XAU/USD continues to coil as traders watch crude oil for direction

Gold has fallen in the last four sessions, and today it wasn’t looking too great either as it continued to coil near that $5K hurdle. The metal is now on its third week of declines, though it was bouncing back slightly at the time of writing.  Can it break that run and find renewed momentum, or will we see a deeper correction first? Our gold forecast remains cautious as with everything else right now, owing to the big surge in crude oil and its impact on inflation and interest rates.

 

What’s driving for gold forecast right now?

 

After a rough couple of weeks, gold is sitting right on a key psychological level — and what happens next could be decisive. The began the week under pressure, extending last week’s near 3% decline and briefly slipping below the critical $5,000 mark. While we’ve seen a slight rebound, momentum is still lacking, at least for now. But this isn’t a straightforward bearish story.

 

On the one hand, you’ve got rising oil prices, driving inflation concerns higher. Disruptions in the Strait of Hormuz have recently pushed crude oil above $100, and that rippled through financial markets. While oil prices have come down a bit, they are still elevated.

 

In recent sessions we have seen bond yields also ease back a tad, but they too remain highs after investors were forced to trim their rate cut expectations, causing the dollar to rebound sharply.

 

That combination is typically not a great mix for gold. As a zero-interest-bearing asset, when interest rates rise, the opportunity cost of holding gold increases. And that’s exactly what we have seen in the last couple of weeks.

 

But geopolitical tensions are still elevated, and that’s keeping safe haven demand alive. Meanwhile, central banks continue to stockpile gold. Even with yields elevated, gold hasn’t exactly collapsed — it has just been grinding lower. AND to make things even more interesting, we have seen equity markets starting to price in the possibility that tensions in the Middle East could ease soon.

 

Following Trump’s speech on Monday, there is cautious optimism that disruptions in oil supply might not be as prolonged as feared. However, if the war continues then the US and Israel will have to continue alone, because other NATO members have decided against joining the conflict. This may work in favour of Iran keeping the Strait of Hormuz closed for longer.

 

If oil prices and bond yields ease, then gold could quickly find its footing again. However, the risks are still titled to the downside for risk assets, meaning gold could stage a short-term dip. If oil stays elevated and central banks turn more hawkish, the pressure on the gold forecast is likely to continue.

 

So right now, gold is stuck between two powerful forces:  Safe-haven demand supporting it on the downside, but the bigger macro headwinds – dollar and yields – pushing it lower.

 

Gold technical analysis: Will we see a clean break below $5000?

 

Gold is currently trading near a major level, namely: $5,000. This psychological barrier has been tested multiple times, and buyers have consistently stepped in over the past week or so. But the pressure is building for a potential breakdown. A daily close below $5,000 would therefore be significant — as it would likely confirm a short-term breakdown and open the door to further downside.

 

 

If that happens, the next levels to watch are on XAUUSD chart are: $4,900, then you have $4,841, the most recent low, and then below that, a trend line comes in around $4,700.

 

On the upside, previous support levels at $5,055 and $5,150 could now act as potential barriers.

 

There’s also a potential falling wedge pattern forming on the chart as prices coil. Eventually, gold will move out of this consolidation pattern. If it breaks out of that structure to the upside, then it will likely trigger some follow-up technical buying that could help lift prices towards $5200 initially and possibly higher over time.  But until that breakout happens, this remains a reactive market — not a trending one.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R