Gold Update: Is There Room for a Bearish Bias in XAU/USD?

After reaching a new all-time high in the $2,954 per troy ounce area, gold has entered a phase of constant neutrality, with movements in the last three sessions remaining below 1%. Market indecision persists as the CNN Fear & Greed Index has started to show neutrality values in the short term.

Market Sentiment

The CNN Fear & Greed Index is currently at 45, which has provided some relief to the market, as the index had remained in the fear zone for the past few weeks following concerns about tariffs.

Source: CNN

The current index values indicate that the market has largely absorbed the uncertainty caused by U.S. tariffs, reducing the demand for safe-haven assets such as XAU/USD. It is possible that the lack of recent tariff-related statements has generated a temporary sense of stability, keeping the Fear & Greed Index at a constant neutral level, which is also reflected in gold’s recent price action in the short term.

As long as the index continues to fluctuate above 40, indicating that neutrality dominates the market, demand for gold may start to stabilize, and the bullish pressure that has prevailed in XAU/USD over the past few weeks could pause in the short term.

Another key factor to consider is that, in recent sessions, the part of the Fear & Greed Index that measures volatility has also entered neutral territory, while movements in the CBOE Volatility Index (VIX) continue to fluctuate below the 20 level and remain under the 50-period simple moving average.

This suggests that as long as major U.S. stock indices, such as the S&P 500, remain at all-time highs, there is little room for sharp market movements that would trigger fear, according to the latest VIX averages.

Source: CNN

With the VIX providing stable data, overall market volatility has decreased. Lower volatility translates to less concern about sharp short-term declines, which could reduce gold’s appeal as a safe-haven asset, as long as this calmness persists.

What Other Factors Are in Play?

Despite the neutrality that has dominated gold’s price action, it is important to highlight that in recent sessions, relations between the United States and Ukraine have been deteriorating steadily.

This situation has arisen following the U.S. offer to Ukraine of $500 billion in mineral reserves in exchange for security guarantees for the country. However, President Zelensky strongly rejected the offer, stating that Ukraine is not for sale.

Additionally, the recent peace talks initiated by the U.S. and Russia regarding the war have taken a critical turn, as Ukraine has been excluded from official negotiations. This has led the Ukrainian government to express concerns about its national security, fearing that it is being left out of discussions that will define the future of the conflict.

If the relationship between Trump’s administration and Zelensky continues to deteriorate, it is possible that the war in Ukraine could escalate further, increasing demand for safe-haven assets such as gold.

Meanwhile, Goldman Sachs has raised its long-term gold forecast, setting its target price at $3,100 per troy ounce. The bank believes that gold still has significant upside potential due to global political uncertainty resulting from recent events. If central bank risk and the potential for economic sanctions continue to increase, gold prices could rise even further, according to the bank’s analysis.

It is important to consider that major financial institutions are viewing gold as a key asset in a scenario of rising global uncertainty, which could maintain bullish pressure on XAU/USD if conditions deteriorate further.

Gold Technical Forecast

Source: StoneX, Tradingview

• Uptrend: The gold chart maintains a strong long-term uptrend. However, since early January, XAU/USD has accelerated its appreciation, giving rise to a steeper bullish trend.

  Currently, movements above $2,900 per ounce have encountered significant resistance for buyers, leading to short-term consolidation. However, so far, there have been no major trend breakouts indicating a potential end to the gold rally.

   

• RSI: The RSI line remains above the overbought level (70) and has formed a bearish divergence, as the price has reached higher highs, while the RSI has recorded lower highs. This suggests that the market may be unbalanced, increasing the likelihood of a downward correction in gold.

Key Levels to Watch:

• $3,000: Tentative resistance. This level has been tested multiple times in recent sessions. A break above this psychological level could reinforce the bullish trend and attract more buyers.

   

• $2,850: Near-term support. This level aligns with recent neutral candles and the short-term uptrend line. It could be the area where potential downward corrections occur.

   

• $2,800: Major support. This level represents the highs of the past three months. A break below this point could intensify the bearish bias, putting the current uptrend at risk.

Written by Julian Pineda, CFA – Market Analyst