Gold forecast: XAU/USD at fresh records amid trade war tensions

• Key events this week, including Powell’s testimony and US CPI data, could shape the gold forecast
• Gold breaches $2,900 for the first time, edging closer to the $3,000 milestone
• Safe-haven demand surges as US trade tensions escalate, overshadowing a stronger dollar

Gold continues to defy expectations, surging to unprecedented heights almost daily. Today, it breached the $2,900 mark for the first time ever, inching closer to the psychologically significant $3,000 level. This latest rally is fuelled by heightened safe-haven demand, driven by escalating trade tensions between the United States and its major trading partners. Remarkably, gold investors have brushed aside the renewed strength of the US dollar and Friday’s rebound in bond yields, both of which were bolstered by stronger economic data last week. While a sustained rise in yields could eventually weigh on gold’s appeal by increasing the opportunity cost of holding the metal over bonds, traders are currently riding the bullish wave as gold continues to set higher highs and higher lows. The question now is whether this momentum will persist. Key events this week, including US CPI data, Federal Reserve Chair Jerome Powell’s testimony, and corporate earnings, could inject further volatility into the markets and impact the gold forecast.

What’s driving gold right now?

Gold’s more recent surge can be attributed to a confluence of factors, including geopolitical uncertainties, inflation concerns, central bank policies, and robust demand from both central banks and retail investors. Although rising global bond yields typically act as a headwind for gold, this trend has paused since mid-January, allowing the metal to maintain its upward trajectory. For now, the bullish drivers have outweighed the bearish ones, but will this balance hold in the coming weeks? The gold forecast remains cautiously optimistic, but traders should keep a close eye on evolving macroeconomic conditions.

Will silver also rally if gold closes in on $3K hurdle?

With regards to whether gold potentially hitting $3000 could lead to a corresponding silver rally remains to be seen. While I am bullish on silver in the long-term, it has continuously been underperforming gold. The gold-silver ratio is back above 90.00, underscoring the view that gold may continue to outperform in the near-term outlook.

The US dollar’s role in the gold forecast

Both the US dollar and bond yields gained traction on Friday as fresh inflation concerns emerged, pushing the DXY above 108.00. The University of Michigan’s Inflation Expectations survey jumped to 4.3% from 3.3%, stoking fears that inflationary pressures remain persistent. Additionally, January’s wage growth came in at 0.5% month-on-month, reinforcing expectations that the Federal Reserve will maintain its higher-for-longer stance on interest rates. Speculation about potential inflationary policies under the Trump administration has further bolstered a hawkish outlook. Markets have adjusted their rate-cut expectations, lending strength to the greenback. Yet, gold barely flinched, briefly dipping from Friday’s record high before swiftly rebounding to a new all-time peak today. Friday’s data has effectively ruled out any imminent Fed rate cuts, though such a move was always unlikely.

Key events this week: Powell’s Testimony, CPI, and Retail Sales

With Trump’s economic policies likely to exert further upward pressure on inflation, the Fed is expected to hold rates steady. The US dollar remains well-supported, particularly against the euro, which remains vulnerable to trade tensions and potential US-imposed tariffs.

Day one of Powell’s Testimony is on Tuesday, 11 February at 15:00 GMT. Powell is expected to reaffirm the Fed’s independence, especially in light of the latest strong inflation and wage data. Any hints of dovishness could pressure the US dollar and bond yields, though such a shift remains unlikely.

The key data release is US CPI on Wednesday, 12 February at 13:30 GMT. Markets will scrutinise inflation figures closely. A strong CPI reading would reinforce expectations of a prolonged Fed pause, further underpinning the dollar. Economists expect an unchanged CPI of 2.9% y/y. Thursday’s Producer Price Index (PPI) release will also be of interest.

The other key US data will be Retail Sales on Friday, 14 February at 13:30 GMT. Retail spending has remained resilient despite high interest rates and inflationary pressures. However, December’s weaker-than-expected data raises concerns about a potential slowdown in consumer spending. Corporate earnings this week, particularly from major retailers and tech firms, will provide further insight into the health of the US consumer.

Technical gold forecast: Key levels and factors to watch

Gold remains firmly in an uptrend, consistently setting new highs. However, signs of exhaustion may soon emerge. The Relative Strength Index (RSI) is flashing overbought signals across multiple timeframes: the daily RSI sits at 77, the weekly is above 70 with negative divergence, and the monthly has pushed beyond 79. These levels suggest that a pullback or consolidation may be on the horizon. However, a clear reversal signal is needed before turning tactically bearish. The overbought RSI conditions serve as a warning for bulls to remain vigilant.

Source: TradingView.com

Gold has now broken through the 127.2% Fibonacci extension of its October-November correction at $2,859. If the rally continues, the next upside target lies at the 161.8% extension at $2,946. On the downside, immediate support on the gold chart is at the now-broken $2,880 level, followed by $2,850. Below that, the October high of $2,790 and the $2,710-$2,725 region are the next key levels to watch.

While gold’s bullish trend remains intact, traders should be mindful of potential near-term corrections given extreme RSI readings and evolving macroeconomic factors.

Record Highs: More Upside or a Pullback? A Gold Forecast Analysis

Trump’s stance on trade tariffs has been a wildcard, both in his previous and current administrations. His early tariff threats spooked markets, prompting investors to seek refuge in safe-haven assets like gold. Now, his latest pledge to impose tariffs on steel and aluminium imports has added further fuel to gold’s appeal. That said, with equity markets holding steady, investors may view Trump’s tariff rhetoric as more of a negotiation tactic than a real economic threat. If signs emerge that he might delay or scale back tariffs, gold’s role as a hedge against trade risks could diminish somewhat.

Gold’s latest all-time highs raise the question: can it push towards $3,000, or is a correction imminent? Much will depend on Trump’s policies, upcoming economic data, and the Federal Reserve’s next moves. If economic indicators point to renewed strength—particularly in inflation—gold could face near-term headwinds as bond yields potentially rebound. However, gold has weathered previous yield rises, making it uncertain whether this time would be any different. For now, gold bears will likely remain on the side-lines unless a clear technical trend reversal takes shape. The gold forecast remains cautiously bullish, with the trend still pointing higher.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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