Gold Price Forecast: XAU/USD to remain volatile, with risks of extending pullback

XAU/USD Current price: $2,025

• The sharp retreat from record highs warns about the sustainability of one-directional moves.
• Volatility will likely remain elevated ahead of US data and next week’s events.
• The short-term bias favors the downside while below $2,040.

Gold spot recorded a new all-time high near $2,150 at the weekly opening and then experienced a sharp corrective pullback, extending below $2,040. Wild moves could continue throughout this week’s key labor market data from the US, as well as market preparations for next week’s central bank meetings and the US Consumer Price Index data.

On Friday, despite a hawkish tone from Federal Reserve Chair Jerome Powell, Gold advanced sharply, and the momentum exploded from the weekly opening. Gold remains supported by hopes, not only that the tightening cycle from the Fed and other central banks is over but also for expectations of interest rate cuts. However, today’s pullback could reflect that the odds went too far regarding rate cuts.

The Gold market at the moment appears to be on its own, more reflective of a shift in sentiment rather than specific fundamentals. No particular catalyst led to the rally to $2,150, and no specific event pushed the price sharply back to $2,000. US yields rose but only modestly, and the Dollar strengthened on Monday, not explaining the magnitude of the moves.

XAU/USD short-term technical outlook

Gold price sharply fell, dropping more than a hundred dollars from all-time highs, indicating the possibility of a short-term top. However, considering that volatility is expected to remain elevated, a rally towards new highs should not be ruled out but looks unlikely. The overall trend remains upward, but a decline below $2,010 would clear the path for a deeper correction.

On the 4-hour chart, XAU/USD broke below an uptrend line, and technical indicators are biased to the downside. Price found support around the $2,020 area, and a further break lower would expose the $2,005 area. The next target below stands at $1,990. The negative bias will remain in place as long as it stays below $2,040. If gold rises above $2,050, it would negate the negative momentum and could trigger a rebound towards $2,080.

Support levels: $2,020 $2,005 $1,985

Resistance levels: $2,050 $2,100 $2,150

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