Gold outlook: precious metal rises for eight week but momentum fades

Gold closed lower on Friday, presumably on the back of some profit-taking, though the metal still managed to close higher for an eighth consecutive week. But as we saw with the US equity markets on Friday, markets can go up as well as down, and when sentiment turns, even the mighty gold will not escape a swift sell-off. With gold and the S&P having a positive correlation in recent years, we could see the metal drop should the sell-off continues in the week ahead. So, the short-term gold outlook could easily turn negative if we see the breakdown of some key support levels.

What factors have supported gold outlook?

Weaker than expected data and a surge in long-term inflation expectations by surveyed consumers finally hurt the stock markets on Friday. It was the worst session of 2025 for US stocks as bond rallied and yields slumped. Gold still managed to hold onto a weekly gain, even if it eased slightly on the day, but silver sold off along with crude oil.

So why didn’t gold drop along with risk assets? Well, haven flows may have been the reason, fuelled by geopolitical and trade tensions. This is something that has so far deterred any significant profit-taking or speculative shorting for the time being. Traders continue to buy on dips, maintaining the strong bullish momentum that has characterised recent price action. Uncertainty over Trump’s ability to negotiate a swift resolution in Ukraine—despite his confident rhetoric—has helped sustain gold’s appeal as a safe-haven asset. With Kyiv and EU both appearing increasingly isolated in the US-Russia peace talks, investor appetite for gold remains firm for now.

But the correction risks are growing amid severely overbought technical conditions, especially given the metal’s positive correlation with the S&P 500.

What factors could turn the gold outlook bearish?

For all the current strength in gold, a corrective move lower would not be entirely unwelcome, particularly among traders wary of an overstretched market. Should geopolitical tensions ease, gold’s haven appeal may weaken. Trump’s ambitions to mediate in Ukraine and Gaza could reduce demand for defensive assets, though this remains far from assured. Additionally, his aggressive fiscal policies and protectionist stance may fuel inflationary pressures, which could prompt further delays in the Federal Reserve’s rate cut. Any delay in monetary easing would, in turn, support bond yields, creating headwinds for gold.

At this stage, though, there are no clear technical signals of an imminent reversal. However, a move below $2900 could serve as an early warning that bullish momentum is fading. A decisive break beneath $2877 would be more concerning, as it would establish a lower low, potentially shifting sentiment towards a more corrective phase.

Technical gold (XAU/USD) outlook: key levels to watch

Source: TradingView.com

The price of gold has been grappling with resistance around $2940–$2950, an area that aligns with the 161.8% Fibonacci extension from October’s downswing. This zone has already prompted some profit-taking, while the daily RSI remains in overbought territory, with negative divergence suggesting the rally may be losing steam. That said, a clean break above this range could pave the way for further upside, with the psychologically significant $3K level coming into view.

On the downside, $2877 remains a key technical threshold. Should this support give way, it would confirm a short-term shift in the gold outlook, potentially opening the door to a deeper pullback. If that happens, we could then see some follow-up technical selling towards the $2790-$2800 key support area.

Until then, the broader trend remains intact, with buyers still eager to step in at the first sign of weakness.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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