Gold forecast: XAU/USD rises to key level ahead of big macro events

Precious metals gained ground throughout the European session on Monday and were still holding into the positive heading deeper into the US session. Gold and silver were buoyed by renewed optimism from China. A shift in Beijing’s monetary strategy provided a boost to Chinese stocks and rippled through global markets, lifting commodity prices, including gold. Add geopolitical tensions from the Middle East to Europe, and it’s clear why safe-haven assets like gold saw a recovery. The week ahead, however, brings high-stakes events like interest rate decisions from major central banks and key US inflation data, all set to influence the gold forecast.

China’s stimulus and central bank meetings

China is signalling a more relaxed monetary policy for the coming year, sparking hopes of further stimulus. Such measures could be a game changer for China’s stock market. It remains to be seen if it will help lift consumer confidence to the point that it leads to a rise in gold demand in China. For now, traders are buying gold in anticipation but don’t expect this to provide a lasting support. Support for gold will have to come from other factors, particularly if we hear significantly more dovish tones from other central banks meeting in the next couple of weeks – the ECB and Fed, in particular. As well as the ECB this week, the Bank of Canada and Swiss National Bank are all on deck with policy announcements. Should these institutions lean toward easing more than investors expect for 2025, it might further support gold’s appeal, especially amidst lingering geopolitical uncertainties. However, if we hear less-than-dovish remarks then this may not provide much support, if at all, to gold prices.

Gold traders looking ahead to CPI

Gold prices are stuck in a two-week range despite today’s 1.3% rise so far in the trading session. November marked a turning point with gold retreating from its October highs, ending a nine-month winning streak. This has left many investors adopting a “wait-and-see” approach. With the US Consumer Price Index (CPI) report and the Federal Reserve’s final meeting of the year looming, the gold forecast hinges on these pivotal events. Will gold break out of its consolidation phase, or is a deeper correction on the horizon?

A stronger dollar could weigh on gold

While optimism around China’s stimulus boosted procyclical currencies, the Dollar Index remains near recent highs. A stronger dollar has been a significant headwind for gold, making it pricier for key consumers in China and India. Together, these nations account for over half the global jewellery market. Coupled with a shift toward riskier assets like tech stocks, gold’s allure has taken a hit. Even so, Monday’s recovery hints that gold’s consolidation might be nearing its end—though a confirmed breakout is still needed to reignite momentum.

Technical gold forecast: Key levels to watch

Source: TradingView.com

Gold’s technical outlook looks unclear at this stage and more price action is needed to tip the balance either in the bulls’ or bears’ favour. So, let’s observe price action around some key levels on the gold chart to get a better idea of directional bias:

• Initial resistance at $2668-$2670: marking the bearish trend of the wedge pattern, a close above this area could signal a bullish reversal
• Key Range at $2708-$2725: This area was previously support and resistance, making it a logical target for those looking for a breakout from the falling wedge pattern.
• Initial support at $2645: this was Friday’s high and where the 21-day exponential average comes into play
• Next support at $2580: This was the area where the last recovery started from in mid-November. If we drop below this level, then this could pave the way to $2500-$2530, with long-term support near $2440-$2400 aligning with the 200-day moving average.

In Summary

The short-term gold forecast remains murky, with competing factors like a strong dollar, geopolitical uncertainties, and major economic data releases shaping market sentiment. While long-term trends favour gold, immediate resistance levels and waning momentum call for caution. Traders are likely eyeing the upcoming CPI report and ECB meeting for a clearer direction. However, the Federal Reserve’s rate decision next week could ultimately be the decisive factor in gold’s next big move.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R