- Gold forecast weakens slightly amid upbeat tone on US-China trade progress
- Crucial $4,000 support has been taken out, at least for now
- Broader bullish outlook still intact
Gold prices came under pressure again today, extending last week’s slide as risk appetite improved across global markets. After an impressive nine-week winning streak, gold’s momentum stalled abruptly, with prices dropping 3.5% over the week, although at one point it was down much more than that. Still, the metal had managed to cling to key support around the $4,000 level. BUT today it has taken this level out, a key threshold that will define the near-term gold forecast. Let’s now see if gold will now decide to hold below this key level, or quickly reclaim it.
Risk-on mood dulls gold’s shine
The decline in gold prices has coincided with renewed optimism surrounding trade negotiations between the United States and China. As risk sentiment improved, the S&P 500 reached fresh record highs, leaving safe-haven assets like gold on the back foot.
US President Donald Trump struck an optimistic tone, telling reporters he “really feels good” about a deal, with reports suggesting that China could resume soybean purchases and ease restrictions on rare-earth exports. In return, Washington may scale back its recent tariff threats.
While these developments have lifted market spirits, analysts remain sceptical that the underlying issues — such as national security and tech competition — will be fully resolved. Nevertheless, traders have embraced the risk-on mood, leaving less immediate demand for gold as a hedge.
China’s gold buying cools but demand persists
Adding to the cautious tone was a slowdown in Chinese gold imports. Data from Hong Kong showed that September’s net exports to China fell 17.6% month-on-month, signalling softer demand from the People’s Bank of China (PBoC). However, with imports still above 22 tonnes, this moderation may suggest that the PBOC feels these high prices might have gotten too hight, too quickly, rather than a fundamental shift in China’s reserve strategy. One month’s data is hardly conclusive, and with official PBoC figures due in early November, markets will soon have a clearer view of the central bank’s intentions.
Central banks and the dollar take centre stage
The week ahead is shaping up to be pivotal for the gold forecast, with several major central bank meetings scheduled. Among central bank meetings, it is the Federal Reserve’s tone which will be a key factor for global risk sentiment. The recent US dollar rebound has also contributed to gold’s retreat, making it more expensive for international buyers. Should the greenback soften again, it could remove one of the headwinds facing the metal. A dovish turn could renew interest in non-yielding assets like gold, particularly if economic data continues to soften into year-end.
Technical gold forecast: $4,000 breaks – for now
From a technical standpoint, gold was always in danger of breaking the $4K support level after how it closed last week. Lo and behold, it sliced through this hurdle earlier today before diving further $15 at the time of writing. But whether the move below $4,000 proves to be a temporary one or otherwise is what we should be focusing on now from a tactical standpoint.
The broader gold forecast remains cautiously bullish as long as prices hold around the $4,000 threshold, give or take a couple of hundred dollars. The bears will be looking for a decisive breakdown – one that sees gold remains below this hurdle for a while longer than just a couple of days. If this scenario plays out, then it could trigger further liquidation, particularly from speculative long positions. Conversely, resilience here around the $4K level may tempt dip-buyers back into the market — especially those who missed out on earlier gains.
In terms of resistance, well sits around $4045, marking Friday’s low now that we have broken below it. Above that, $4,200 is the next key battleground -- a sustained move above that zone could signal that the longer-term uptrend remains intact. But for now, the focus is all on that $4,000 level: is this going to be reclaimed quickly or not? If not, it would likely open the door to deeper corrections.
In summary, the near-term gold forecast hinges on risk sentiment, central bank buying, and the dollar’s trajectory. While optimism over trade talks has dulled gold’s appeal for now, the longer-term outlook remains underpinned by lingering geopolitical and inflationary risks, ensuring the metal is far from out of favour. But in the short-term, the break below $4K, if sustained, won’t be a great sign.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
