Gold forecast: XAU/USD eases off record but uptrend remains intact

Gold forecast: XAU continues to find support from multiple sources, and this is discouraging investors from banking profit or traders shorting the metal just yet. A lot of the buying is simply because the existing trend and momentum has been so bullish that traders are happy to continue buying every dip that they can get their hands on – which was again the case this week after Friday’s dump. Some doubts emerged over Trump's ability to secure a quick peace deal in Ukraine, contrary to his optimistic tone with Ukraine feeling increasingly isolated by the US administration. This helped to keep gold supported on continued haven flows.

What factors would cause gold forecast to turn negative?

But with speculation running high, many traders would welcome a correction to shake out froth, particularly if geopolitical risks start to ease now. Trump’s ambition to resolve conflicts in Ukraine and Gaza could dent safe-haven demand should he succeed. His protectionist policies and aggressive spending plans may also fuel inflationary pressures, delaying rate cut expectations and supporting bond yields.

So, there is a risk we could see the rally falter but so far, we haven't had any concrete technical signals to suggest that is the case. A potential break below $2920 would be a warning signal for me, while a move below $2877 would confirm a reversal since prices will have formed a lower low.

Technical gold forecast: Key levels to watch on XAU/USD

Source: TradingView.com

The key resistance area of around $2940 to $2950 needs to be monitored closely on the gold chart. As well as marking the recent highs, the 161.8% Fibonacci extension level of the last downswing that took place in October, comes into play here. Meanwhile the daily RSI is at overbought levels and a state of negative divergence. These technical factors have triggered some profit-taking here, but a proper breakdown has not yet occurred. A decisive break above this $2940-2950 range could pave the way for more gains as the metal closes in on the $3K level. The line in the sand for me is at $2877, marking last Friday’s low. If that level were to now give way, then the technical gold forecast will turn negative in the near-term outlook.

Video: Dollar drops

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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