Gold (XAU) Price Forecast: Bearish Reversal in Play as Traders Eye $2746.58 Target

Gold Drops for First Time in Nine Weeks as Dollar Strength and Fed Uncertainty Weigh

Gold prices recorded their first weekly decline in nine weeks, pressured by a resurgent U.S. dollar, shifting Federal Reserve expectations, and investor caution surrounding global trade tensions. While the long-term bullish case for gold remains intact, short-term sentiment has turned bearish as traders adjust to evolving economic risks and central bank policy.

Last week, XAU/USD settled at $2,858.14, down $78.12 (-2.66%).

Is the Fed’s Inflation Stance Eroding Gold’s Appeal?

The Federal Reserve remains a dominant force in gold’s price action, with traders closely tracking its response to inflation data. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, rose 0.3% in January, aligning with expectations. Core PCE, which strips out volatile food and energy prices, increased 2.6% year-over-year, slightly lower than 2.7% in December.

This data reinforced expectations that the Fed may delay interest rate cuts—an unfavorable scenario for gold. Futures markets still price in a 79% probability of a rate cut in June, but policymakers remain cautious, offering no clear signals of imminent easing. Higher-for-longer interest rates reduce gold’s appeal as a non-yielding asset, pressuring prices lower.

Trade War Tensions Strengthen the Dollar, Not Gold

Rising trade tensions added to gold’s struggles this week, but instead of boosting safe-haven demand for bullion, the uncertainty drove investors into the U.S. dollar. President Donald Trump reaffirmed that 25% tariffs on Mexican and Canadian goods will take effect in March, alongside an additional 10% duty on Chinese imports.

Rather than spurring gold inflows, the uncertainty strengthened the dollar as investors sought stability. The dollar index climbed nearly 0.9% this week, hitting a two-week high, making gold more expensive for foreign buyers and weighing on demand. Historically, trade conflicts tend to support gold prices, but this time, the market favored cash and the greenback instead.

Are Profit-Taking and Deleveraging Adding to Gold’s Weakness?

Gold’s recent rally to $2,956.31, an all-time high, prompted a wave of profit-taking. Analysts at Kitco Metals and Zaner Metals noted that stock market losses triggered margin calls, forcing traders to liquidate gold positions. This broad deleveraging across financial markets added downward pressure on gold, exacerbating its pullback.

Market Forecast: Will Gold Regain Its Footing?

Despite this week’s retreat, gold’s long-term bullish fundamentals remain intact. Central bank demand, persistent inflation risks, and geopolitical uncertainties continue to provide a strong floor for prices. However, in the short term, headwinds from a firm U.S. dollar, a cautious Fed, and ongoing profit-taking could limit upside potential.

Technically, last week’s price action formed a potentially bearish closing price reversal top on the weekly chart. A trade through $2832.72 will confirm the move, setting up a 2-3 week correction with $2746.58 the first target price.

For gold to stage a meaningful rebound, traders will look for weaker U.S. economic data, a softer tone from the Fed, or an escalation in geopolitical tensions. Until then, gold may remain under pressure as investors favor liquidity and the dollar over bullion.

More Information in our Economic Calendar.