After rising for four consecutive weeks, gold kicked off the new week on a strong footing this morning, rising a cool 0.9%, while silver rebounded from Friday’s drop with a 3% bounce. Both metal remained below their respective record highs, with traders being wary of the recent bond market sell-off. Any further weakness in bonds, or strength in yields, could pressurise low- and zero-yielding assets like gold, particularly as demand for safe haven assets should have dwindled in recent weeks. The recent wobble in technology stocks and cryptocurrencies suggests even the strongest of trends can come undone when things get too hot. I feel that’s the case with gold forecast at the moment, although it still hasn’t shown any bearish reversal signs yet.
What to watch out for gold forecast this week
In short, the US dollar and bond yields. This could well be the final meaningful trading weeks of the year in the markets. The Us dollar came under pressure last week, stemming from a Federal Reserve that left the door open to further rate cuts. That also helped to support gold prices. But if the USD were to bounce back this week, which is a busy one for data and Fed speak, then gold could lose some shine. The standout event on the US economic calendar is tomorrow’s November nonfarm payrolls report. Markets are looking for a soft print of around +50K, with the unemployment rate seen edging up to 4.5%. Any downside surprise could see expectations for the next Fed rate cut pulled forward, supporting gold.
Thursday then brings November CPI, where headline inflation is expected to tick up slightly to 3.1% year-on-year. Alongside the data, Fed rhetoric will matter for gold, too. New York Fed President John Williams speaks later today, while Chris Waller weighs in on the economic outlook on Wednesday. Both of these Fed officials have been instrumental in shifting expectations over the Fed’s rate decision last week.
Meanwhile, there’s a heavy central bank calendar across the eurozone, Japan, the UK, as well as several other countries, putting global bond yields into focus on any hawkish leaning meetings, particularly from the ECB.
Technical gold forecast and trade ideas
There is no question about the current trend on the gold forecast. But could we see some short-term pressure on gold prices? The metal was testing resistance in the lower end of the $4,350–$4,381 resistance zone, which marks the area where selling pressure last emerged back in October. Whether we see another bout of volatility from here is the key question, as this is effectively the final major resistance zone before a potential upside breakout.
Source: TradingView.com
If the rally can extend beyond this region, the next obvious targets on the XAUUSD chart come in around $4,400, followed by the psychologically important $4,500 level. On the downside, attention shifts to the $4,245–$4,265 area. This zone acted as resistance previously and now needs to hold as support on any pullback if bulls are to remain firmly in control.
Things would become more interesting—and more concerning—if gold were to break below this support band. That could open the door to further technical selling, particularly if the recent low around $4,170 gives way. In that bearish scenario, the next downside target could be the $4,000 level, which is now some distance away.
Overall, the trend and the gold forecast remains bullish. However, with the US dollar testing key levels against major currencies and Friday’s drop in equity markets a reminder that markets can drop unexpectedly, a degree of caution is still warranted.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
