Gold has been shining brightly again over the past several days, breaking out to new record highs. Today, the metal was up another 0.8% at the time of writing and there were no obvious signs of a slowdown in the trend. Silver, too, was rallying as it broke to a new multi-year high above $41. We are obviously wary of significantly overbought prices on the long-term charts, but that alone is not enough to drop our bullish gold forecast yet. However, a bit of a pause and a mini correction would be considered a healthy outcome, if seen.
Gold continues to break records
The price of gold was already at record territories before the jobs opening data was released earlier today. Given that the data was softer, this basically cemented expectations over a 25 basis point rate cut later this month, and in doing so, kept the precious metal supported. The metal has been on a tear of late following a length consolidation that had started in April. The renewed buying has been supported by a weakening US dollar and rising expectations over interest rate cuts by the Fed. Added to this, you have long-dated bonds coming under stress across the western world. The 30% year US bond yield nearly hit 5% before easing back down. We have seen similar moves in Japan and the UK. Investors are basically demanding higher interest for parking their money with the government. This is because they are not confident about the prospects of a big recovery to help lower the debt to GDP ratios. With Trump about to cut taxes, this will further raise concerns about the US fiscal trends. Against this backdrop, we maintain a bullish gold forecast.
👉 Read our gold forecast for second half of 2025 here
Gold forecast: technical levels to watch
The price of gold is now up for the 7th consecutive day and silver is testing waters above $41. The momentum for both metals is certainly strong. Against this backdrop, the best outcome for gold is now to consolidate as investors book profit. While there is a risk of a price fall if yields continue to rise, the downside could be limited. The trend has to weaken first to invite pressure from bearish speculators. But the current macro backdrop of stagflation and central bank policy loosening is keeping the bulls firmly in the driving seat.
If the trend continues, the next upside target is around $3,600, making the next round handle and the 127.2% Fibonacci extension level of the most recent significant drop from April peak (of $3500). Key support is now the broken April high of $3500 and then $3430/40 area.
Is XAU/USD overheating?
Meanwhile, keep an eye on the Relative Strength Index (RSI), which is pointing to overheated rally. The daily and weekly RSIs are back above 70.0, while the monthly has remained above this threshold for several quarters now. The RSI can unwind from overbought levels through price action (a sell-off) or time (consolidation). The latter is what happened after prices hit a record in April at $3500. That caused the RSI on the daily and weekly to move well below 70 before the latest dip was bought.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
