Gold forecast: XAU/USD extends losses amid strengthening yields, dollar

Gold was down for the fifth consecutive session on Thursday, extending its weekly losses to 5% following last week’s 2% drop. The metal has pulled back around 9% from its latest all-time high hit at the end of October. The drop has certainly helped to work off gold’s severely overbought technical conditions on many time frames. Whether or not this turns out to be a major top, or a temporary pullback ahead of $3K, remains to be seen. But until we see a bullish reversal stick, the short-term gold forecast remains bearish – even if the downside could be limited from here on. But for now, the ongoing hawkish repricing of US rates after Trump's emphatic victory is keeping US dollar and yields underpinned, and buck-denominated gold undermined.

Gold forecast: Why has XAU fallen so much?

Gold’s ongoing weakness is a reflection of two major themes. First, it is the potential for US monetary policy to remain quite restrictive in 2025 under Trump, than would have otherwise been the case. With the US 10-year yield approaching 4.5% amid the hawkish repricing of US rates in 2025, the opportunity cost of holding low- and zero-yielding assets have been on the rise. Gold, which doesn’t pay any interest or dividends, has been among these assets, particularly because it was severely overbought. The second reason why gold is losing out is because investors are pricing out geopolitical risks. The US election uncertainty is now out of the way, which in itself means one less reason for holding the safe haven asset. But more to the point, with Trump wining quite comfortably in the end, this has given markets hope that the conflicts in the Middle East and between Russia and Ukraine could end when Trump starts his presidency next year.

PPI and Powell speech coming up

In as far as today’s macro calendar is concerned, we have a couple of important data releases including US PPI data and initial Jobless claims, along with speech from the Fed chair Powell. It is likely we could see gold prices react to these events.

After all, the PPI data could be a key driver for bond yields, as they closely relate to the core CPE, which is the Fed’s preferred inflation gauge. Economists are expecting a slight uptick in headline PPI from 0.0% to 0.2% month-over-month, while the core measure is seen steady at 0.2% in October.

Meanwhile, Powell will likely face questions about the latest inflation data and the potential effects of protectionist policies under Trump, on the central’s monetary policy in 2025. Gold could benefit if Powell avoids directly linking potential policy shifts to the Fed’s decisions, as this could dampen US rate expectations. As things stand, the market is cautiously pricing in just 50 basis points of easing by mid-2025 – a marked revision from before the US election. The market, though, has a tendency of making its own mind up, and any dovish Powell remarks might fall on deaf ears.

Technical gold forecast: XAU/USD key levels to watch

Source: TradingView.com

Gold is now nearing potential support around $2500 to $2530 and is no longer technically overbought on multiple time frames except the monthly. So, the potential for at least a short-term bounce is now there. But with several prior support levels broken down, the XAUUSD forecast and upside could be limited to around $2600 in the near-term outlook. This level was one of those broken support levels mentioned and is where the backside of the broken trend line comes into play. It needs to reclaim this trend line and level in order to discourage the bears from punishing the metal further.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.