Gold forecast: Is the XAU/USD rally losing team?

Gold hit a new record high earlier today but has since struggled to make further headway and sustain a move towards the psychologically significant $3,000 level. That target remains about $50-$60 from current levels, but could we see a potential dip before the metal potentially reaches that milestone? Well today, gold started the week on a firm note after dipping on Friday, likely due to profit-taking. Despite the minor setback, the metal secured its eighth consecutive weekly gain. However, much like US equities, gold is not immune to market corrections. A shift in sentiment could trigger a sharp pullback, particularly as gold has maintained a strong correlation with the S&P 500 in recent years. With the still hovering at overbought levels across multiple time frames, a downturn in equities could weigh on the gold forecast in the near term. But the European markets bounced back following the German election outcome at the weekend, and this has helped to soothe investor concerns a little. However, as I highlighted in my report earlier, there is a risk of a potential correction in the German market due to severely overbought levels and macroeconomic concerns.

Gold holds steady for now

Friday’s sell-off in the US stock market—the worst session of 2025—was driven by disappointing economic data and a jump in long-term inflation expectations. The Dow and S&P 500 tumbled 1.7%, with the Nasdaq seeing even steeper losses. Meanwhile, bond markets surged, pushing yields lower. Gold, despite some intraday volatility, held on to weekly gains, while silver and crude oil suffered steeper falls.

Gold’s resilience suggests that safe-haven flows continue to support prices. Persistent geopolitical and trade tensions have deterred aggressive profit-taking and short selling, keeping bullish momentum intact. Traders remain eager to buy on dips, reinforcing the metal’s strength.

Adding to gold’s appeal is uncertainty surrounding Trump’s ability to secure a swift resolution in Ukraine. Despite his strong rhetoric, Kyiv and the EU appear increasingly side-lined in US-Russia peace discussions, further driving investor interest in gold as a hedge against instability.

That said, the risk of a correction is growing, particularly given gold’s overbought technical conditions and its tight correlation with the S&P 500, specially with the latter turning a bit volatile since Friday.

What could push gold prices lower?

Despite its recent strength, gold remains vulnerable to a corrective pullback. A decline wouldn’t be a bad thing, especially for traders wary of an overheated market. If geopolitical risks ease, gold’s safe-haven demand could weaken. Should Trump make meaningful progress in negotiations concerning Ukraine and Gaza, appetite for defensive assets may wane, though such an outcome remains uncertain.

From a technical standpoint, there are no immediate signals of a reversal. However, a drop below $2900 could indicate fading bullish momentum. A more significant warning would come with a decisive break below $2877, which could set the stage for a deeper correction.

Technical gold forecast: Key levels to watch

The recent daily candles show small bodies and wicks, indicating consolidation or a loss of momentum. Despite some bearish-looking candles earlier this month, the market still pushed to a new high, lacking strong downside follow-through. So, the key phrase here is indeed “follow-through” which continues to evade the bears. That could change if some key support levels start to break down.

Source: TradingView.com

The key support level on the daily gold chart to watch is $2,877, marking the low of the previous Friday’s bearish-looking candle. A break below this level could lead to a deeper pullback, turning the technical gold forecast bearish in the short-term. In this scenario, we could see gold head down towards the October’s high of around $2790 area.

For now, $2,900 is offering support, with $2,877 being the next critical level below that.

On the upside, resistance is around $2,950, which coincides with the 161.8% Fibonacci extension from the October high to the November low. If a daily close occurs above this area, it could pave the way for a move towards $3,000.

Meanwhile, the Relative Strength Index (RSI) remains overbought across daily, weekly, and monthly charts. Additionally, negative divergence is forming, with the RSI making lower highs while gold prices notch higher highs. This divergence suggests that bullish momentum may be waning. However, no clear bearish confirmation has emerged, meaning RSI conditions serve more as a cautionary signal for now.

Considering Friday’s sharp decline in US markets, traders should remain cautious as markets can rise as well as fall. It’s important to manage risk appropriately and take things one level at a time.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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