Gold forecast: Can the XAU/USD rally continue?

Gold prices are edging higher again, up 0.3% on the session, and on track for a sixth consecutive weekly gain – barring a negative reaction to the upcoming US jobs report. But what’s fuelling this rally, and can it continue? In this gold forecast, we’ll break down the key drivers and potential risks ahead.

What’s driving gold prices higher?

Gold’s recent strength comes from a mix of factors—ongoing geopolitical uncertainties, inflation concerns, central bank easing, and steady demand from central banks and retail investors. While global bond yields have been rising, which is typically a headwind for gold, that trend has paused since mid-January, allowing gold to keep its momentum. Essentially, the bullish forces have outweighed the bearish ones so far.

Gold forecast: Will Trump’s trade tariffs impact XAU/USD prices?

Trump’s stance on trade tariffs was a big unknown before he took office. When he took office again, his initial tariff threats spooked markets, pushing investors toward safe-haven assets like gold. However, his recent decision to delay tariffs on Mexico and Canada signals a more measured approach—at least for now. This could slightly ease gold’s appeal as a hedge against trade risks. We’ve already seen a brief pause in gold’s rally, though prices remain elevated.

Record Highs: More upside or a pullback?

Gold has hit all-time highs, and the key question now is: Can it go even higher to hit $3K, or is a correction around the corner? Much will depend on Trump, economic data and the Federal Reserve’s next moves. If we see signs of economic strength, particularly in job growth or inflation, gold could face short-term pressure as yields potentially rebound. However, gold was able to weather the more recent rises in bond yields, so it is difficult to say whether this time it would be different.

US NFP coming up, but will it be a market move?

All eyes are on today’s payrolls report, which could shake up financial markets. My colleague Matt Weller expects an above-consensus reading, with job growth likely falling in the 175K–225K range, according to his formula. If Weller’s forecast is correct, gold could see an initial dip as traders reassess the likelihood of Fed rate cuts. However, a weaker-than-expected report might trigger renewed demand for gold as the US dollar potentially takes a backseat.

What else will traders be watching?

Beyond today’s jobs data, inflation remains a critical driver for gold. Next week’s CPI report will be crucial—strong inflation could delay Fed rate cuts, lifting the dollar and bond yields while potentially weighing on gold. On the flip side, weaker inflation could give gold bulls another reason to push prices higher.

Gold technical analysis and trade ideas

The trend is clearly bullish on gold with prices hitting repeated all-time highs. This argues against looking for bearish trades, unless done so on a short-term basis and vigilantly. That said, a pullback or correction is probably overdue now, which is what dip-buyers will be looking for. After all, the Relative Strength Index (RSI) indicator has moved well into the “overbought” threshold of above 70.0 on multiple time frames:

• Daily RSI remains round 75, which is above the overbought threshold of 70.00.
• Weekly RSI above 70, and in a state of negative divergence compared to its October high (i.e., lower high compared to gold price making a higher high)
• Monthly RSI is at 78+, although not quite as high as the levels seen in October 2024 (82+) or July 2020 (85+)

With the RSI at these levels, they will eventually need to come back down, either through consolidation or a sell-off. On its own, the RSI is not a “sell signal” per se, but merely a warning for the bulls that prices may have gone up too high, too fast.

Source: TradingView.com

Meanwhile, the price of gold itself has reached the 127.2% Fibonacci extension against the most recent drop that took place between October and November, at $1859. When asset prices are trending strongly at uncharted territories, like the case of gold here, traders often use Fibonacci extension levels as objective ways of coming up with price targets for their long trades. The 161.8% Fibonacci extension of the same price swing comes in at $2946.

If gold does head lower, then first support to watch is at 2845, with the area around the October high of $2790 now being the key support to watch. Below that, the area between $2710 to $2725 will then become in focus.

For now, our gold forecast and the technical trend remain positive, but traders should stay alert to economic shifts that could sway the market in either direction, especially with prices being at these extreme ‘overbought’ RSI levels.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

1. Open an account, or log in if you’re already a customer 
   
   • Open an account in the UK
   • Open an account in Australia
   • Open an account in Singapore
   
   
2. Search for the company you want to trade in our award-winning platform 
3. Choose your position and size, and your stop and limit levels 
4. Place the trade