Gold prices were little changed last week, as the metal consolidated its recent gains and investors awaited direction with major central bank meetings taking place in the next couple of weeks. While the metal remains in a bullish trend, the gold outlook is starting to look a bit questionable as the list of reasons why it could start to head lower soon is increasing by the day – including rising bond yields. I am therefore on the lookout for a short-term bearish reversal, but the charts must tell us that first. I wouldn’t want to pre-empt a turnaround.
Seasonal December dollar weakness vs. hawkish central banks in 2026
The seasonal dollar weakness in December has so far helped to keep the metal largely on the front-foot, although hawkish pricing of global interest rates has also kept bond yields higher. Further rises in yields should discourage investors from bidding up non-yielding gold. The focus is now turning to central bank meetings starting this week. US data was mixed last week with some upbeat surprises, although nothing we’ve seen is likely to dissuade the Federal Reserve from cutting rates this week. With gold being partly underpinned by expectations of imminent policy easing, a rate cut itself will probably not be enough to send gold further higher this week, you’d feel, as this is largely priced in. The market will want to hear a more dovish outlook for 2026, but this is where it might get disappointed. In fact, a key theme into year-end is the growing conviction that several G10 central banks have reached – or are close to reaching – the trough in their respective rate cycles. Beyond the Bank of Japan’s independently hawkish stance, markets now fully price a 25bp hike next year in Australia, New Zealand and Canada. I would even add the Eurozone into that list given recent hawkish comments from some ECB officials and improvement in data.
Gold outlook: Where could the rally unravel?
Much of the recent gains have been driven by geopolitical jitters around Ukraine and Russia, the persistent chatter about de-dollarisation, and steady central-bank demand — particularly from China. Yet, once you strip out these familiar drivers, there isn’t a whole lot else holding things up. It does make you wonder how much juice is left in this rally. Personally, I’m leaning towards a correction. The question is: what might spark it?
A key uncertainty is China’s next move. If the PBOC starts to cool its buying spree at these elevated levels, leveraged longs could very quickly reassess their positioning — and not in a gentle way. At the same time, there are tentative signs of geopolitical easing: slow-burn peace discussions in Ukraine, the recent ceasefire in Gaza, and a renewed US–China trade truce that was struck a couple of months ago. In theory, all of that should trim some of gold’s safe-haven premium. Yet prices have barely reacted.
The softer US dollar has certainly helped kept a firm floor under gold. But it does all feel slightly too calm, as if the market is quietly bracing for something more dramatic. Japan, meanwhile, deserves a mention. Rising JGB yields on expectations of a BoJ rate hike have stirred concerns that turbulence in Japan’s bond market could spill over into global equities. Any unwinding of carry trades could easily ripple into precious metals, pressuring both gold and silver.
Gold technical analysis and trade ideas
Technically speaking, the metal remains in a bullish trend, but momentum is certainly fading and that raises some questions about the gold outlook. That leaves the metal vulnerable to bouts of short-term volatility should a couple of key supports give way.
The $4175/90 zone on the gold chart is the immediate area to watch, where the bodies or lows of the last few trading days have been made. A clean break below this area would bring the short-term trend line and then the $4100 level back into focus, a natural round number and the origin of the most recent upswing. A daily close beneath that level would be a decidedly bearish development for gold, opening the door to a retest of $4000.
On the topside, resistance sits around $4220 to $4270 area — the zone from which gold sold off previously and one the market has failed to reclaim on multiple attempts. The bulls will need to clear this area convincingly if the metal is to make another push towards fresh highs.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
