Gold News: Profit-Taking Hits After Record High—What’s Next for Gold Prices?

Gold Prices Retreat After Record High as Dollar Strengthens

Gold reached a record high of $2,631.41 on Monday before retreating slightly to $2,622.14. The pullback was driven by profit-taking after a sharp rally, with the U.S. Dollar Index rising on the back of weaker-than-expected manufacturing and services data from Germany and the Euro Zone. A stronger dollar tends to weaken foreign demand for gold, making it more expensive for holders of other currencies.

At 10:52 GMT, XAU/USD is trading $2622.22, down $0.02 or -0.00%.

Profit-Taking and Technical Indicators Signal Caution

The retreat in gold prices followed a strong rally, but traders are now cautious due to emerging technical signals. A record high followed by a lower close suggests a potential bearish reversal pattern. This does not signal an immediate change in the overall bullish trend, but it may indicate increasing selling pressure. Should gold fall below $2,546.86, the daily swing chart suggests the trend could reverse, with the 50-day moving average of $2,481.37 acting as major support.

Geopolitical Risks Continue to Support Gold

Despite the profit-taking, gold remains well-supported by strong market sentiment and rising geopolitical tensions. The recent Israeli airstrikes against Hezbollah in Lebanon have added to the geopolitical risk premium, reinforcing gold’s safe-haven appeal. Investors are holding significant positions in gold, driven by fears of further escalation in the region.

Fed Policy and Dollar Strength Limiting Gold’s Gains

While gold surged to a new high, the U.S. dollar’s rise (+0.3%) against six major currencies limited its gains. Despite this, gold remains up over 27% year-to-date, with investors focused on future Federal Reserve rate cuts. Markets are closely watching whether the Fed will deliver another 50 basis point cut this year, which could affect the dollar and potentially reignite gold’s rally.

Gold Market Forecast: Consolidation Expected, Bullish Outlook Long-Term

In the short term, gold may experience further consolidation as traders take profits and react to the stronger dollar. However, the long-term outlook remains bullish, supported by geopolitical risks and anticipated Fed rate cuts.

If gold holds above $2,600, the rally could resume, with a target of $2,700. Key support levels at $2,546.86 and $2,481.37 should be monitored closely. Traders should prepare for short-term volatility but expect a continued upward trend over the long term.