The price of gold hit yet another record high above $4,200 today, with the metal reaching a high so far of $4218, before pulling back a little. With the metal hitting new record highs almost on a daily basis, it feels like there is no real selling pressure. But could that change in the coming days?
What’s driving gold forecast?
The metal has been on a tear, and it doesn’t look like it wants to stop. Supporting the rally is expectations of continued central bank buying, which means traders are trying to front-run them by bidding up prices. Expectations that the Fed will cut rates two more times this year and possibly by an additional 75 basis points in 2026, means investors are expecting bond yields and the dollar to fall. Then there is haven demand, which seems to be only benefitting gold right now. With US–China trade tensions being reignited in the last few days, investors have even more reason to hedge their long equity bets by diversifying into gold. While the correction risks are there, the fact that the momentum has been so strong and pullbacks shallow, it appears like market participants don’t expect a sudden plunge in gold when it eventually tops out. The trend has to weaken first before it can reverse. That is also encouraging the bulls to keep hold of their positions for as long as possible. With the $5K handle now just $800 away, I wouldn’t bet against gold getting there eventually. But I feel a long-overdue correction is first needed to shake out the weaker hands and encourage fresh dip buyers to jump on the bandwagon.
Gold rises despite rebound in stocks
Or should I write, “in spite of” there, because the two assets have been positively correlating for a number of years now. Anyway, risk appetite improved overnight, with US index futures climbing to new weekly highs, though European markets showed a more mixed performance. In currencies, the US dollar index retreated against most major peers, surrendering part of its recent gains. Market sentiment this week reflects a cautious blend of optimism and restraint. Expectations for Federal Reserve rate cuts remain the key driver, underpinning risk appetite even as gold extends its record-breaking rally beyond $4,200.
Investors appear largely unfazed by renewed US–China trade tensions, brushing off President Trump’s latest warning on cooking oil imports. But this seems to have helped gold, if anything. Meanwhile, solid US bank earnings have bolstered confidence in corporate resilience, keeping equities supported despite the ongoing US government shutdown. The dollar’s pullback mirrors both improving global risk sentiment and dovish remarks from Fed Chair Powell, who suggested that rising labour market risks justify another rate cut.
Adding to the upbeat tone this morning, French political tensions eased after Prime Minister Sébastien Lecornu announced a delay to his contentious pension reform plan. The news helped the euro, and weighed on the dollar index.
Technical gold forecast and key levels
From a technical standpoint, there is no question about the trend on the XAUUSD chart, which remains unambiguously bullish. The consistent breakouts to new all-time highs, minimal pullbacks and rising moving averages all suggest the trend is very strong. Yet prices are at historic overbought levels when you look at any momentum indicators like the Relative Strength Index (RSI). Such overbought conditions typically precede periods of consolidation or mini corrections. Let’s see if we will now get a bit of a dip. But unless we see the end of the series of higher highs and higher lows, the path of least resistance will remain to the upside. Only when that changes will the gold outlook turn bearish from a technical point of view.
Short-term supports to watch include $4117, $4059, $4023 and $4,000.
Upside targets include round handles like $4200 (already reached), $4300, $4400 etc.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
