Gold (XAU) Price Forecast: Can Geopolitical Risks Propel Gold Beyond $2,800?

Gold Rallies Amid Political and Economic Uncertainty

Gold prices surged to a new high on Monday, extending Friday’s exceptional rally driven by heightened geopolitical tensions and economic uncertainty. Investors are closely monitoring global developments, particularly the U.S. presidential race and unrest in the Middle East, as they weigh the potential for gold’s continued upward movement. With no resistance at its all-time highs, traders are focused on potential reversals driven by profit-taking.

At 10:54 GMT, XAU/USD is trading $2732.45, up $10.55 or +0.39%.

Geopolitical Tensions and Central Bank Policies Support Gold

Gold’s rally is supported by growing geopolitical risks and a dovish stance from major central banks. In particular, the U.S. Federal Reserve is expected to cut interest rates in November, with traders pricing in a 99% probability of such a move. Meanwhile, the European Central Bank (ECB) reduced its key interest rates by a quarter point last week, further bolstering gold’s appeal. Low-interest rates enhance gold’s attractiveness as a non-yielding asset, making it a go-to investment during periods of economic and political turmoil.

Tensions in the Middle East are also influencing market sentiment. On Sunday, multiple explosions were reported in Beirut, as Israel prepared to target Hezbollah-linked financial operations, contributing to the flight of hundreds of residents. Additionally, the looming U.S. presidential election is adding to the uncertainty, with former President Donald Trump and Vice President Kamala Harris running a tight race in key battleground states.

Economic Data and Rising Yields May Cap Immediate Gains

Despite the bullish environment, rising Treasury yields and a stronger U.S. dollar could limit further short-term gains. The yield on the 10-year U.S. Treasury rose to 4.11% on Monday, providing an attractive alternative for investors. A stronger dollar, driven by market expectations of higher U.S. interest rates, has also created headwinds for gold. Last week, the dollar index gained 0.55%, while the euro and yen weakened against the dollar. A continuation of this trend could temper gold’s upside potential.

Profit-Taking and Technical Levels to Watch

Some traders expect gold to face resistance as profit-taking sets in, particularly after the recent surge. According to analysts, a key technical level to monitor is the 50-day moving average, which could signal a shift in the intermediate trend if breached. More critical would be a violation of the swing bottom at $2,604.39, which would indicate a potential trend reversal. Despite the possibility of short-term corrections, many expect that gold buyers will be waiting for pullbacks to enter the market at better prices.

Gold Prices Forecast: Upside Potential with Caution

Looking ahead, gold is likely to remain supported by global uncertainties and dovish central bank policies. Market analysts see $2,800 as a viable year-end target, but the immediate upside may be limited as investors lock in profits. Nonetheless, the broader environment remains favorable for gold, and any short-term dips could present buying opportunities for traders expecting further gains as economic and geopolitical risks persist.