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Gold (XAU) Price Forecast: Traders Eye $2,790 as Geopolitical Risks Remain Elevated
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Key Points:
- Gold surged 5.97% last week, closing at $2,716. Safe-haven demand and Fed rate expectations drove the rally.
- Gold closed above $2,663, a key pivot level. Analysts eye $2,790 as the next major target if momentum continues.
- Geopolitical tensions, including Russia-Ukraine strikes, added $170 to gold prices from November’s $2,536 low.
- Markets anticipate a 53% chance of a Fed rate cut in December, keeping gold appealing as a non-yielding asset.
- Fed comments and mixed U.S. economic data shaped gold’s rally, balancing job strength with manufacturing weakness.
In this article:
Why Did Gold Record Its Best Week in Nearly Two Years?
Gold prices soared last week, closing at $2,716.34 with a gain of $153.12, or 5.97%, achieving the strongest weekly performance since March 2023. The sharp rally was driven by a surge in safe-haven demand, geopolitical tensions, and shifts in Federal Reserve rate expectations.
The escalation of the Russia-Ukraine conflict was a key factor. Missile strikes and concerns of potential nuclear escalation spurred investor interest in gold, which has long been a favored hedge during periods of uncertainty. Analysts observed that both gold and the U.S. dollar advanced simultaneously—a rare occurrence that highlights the intensity of safe-haven flows during the week.
How Did Federal Reserve Policy Influence Gold’s Rally?
Evolving Federal Reserve rate expectations provided a strong tailwind for gold. At the start of the week, markets anticipated a 59.4% chance of a 25-basis-point rate cut in December, supported by dovish remarks from Fed officials. This increased the appeal of gold as a non-yielding asset. However, by the week’s close, expectations had moderated, with rate cut odds falling to 53%, reflecting mixed signals from the Fed.
Economic data further shaped sentiment. While robust jobless claims indicated labor market strength, weak manufacturing reports highlighted broader vulnerabilities. This mixed outlook tempered the U.S. dollar’s gains, allowing gold to maintain its rally.
Can Geopolitical Risks Continue to Propel Gold Higher?
Heightened geopolitical tensions were a major catalyst for gold’s sharp rise. Reports of escalating strikes in the Russia-Ukraine conflict and concerns over global stability drove gold prices over $170 higher from their November 15 low of $2,536.85. The deepening crisis has reinforced gold’s status as a preferred safe-haven asset, and analysts believe ongoing uncertainty could sustain its appeal.
Where Are Gold Prices Headed Next?
Gold’s close above the key pivot level of $2,663.51 last week solidified it as a critical support zone. If prices hold above this level, gold could advance further, potentially testing the all-time high of $2,790.17. Failure to maintain this level may lead to a retreat, with support levels at $2,631.04 and $2,571.68 providing potential downside targets.
Outlook: The outlook for gold remains strong as safe-haven demand, geopolitical concerns, and central bank policies continue to support prices. Traders should watch for a potential climb toward $2,750-$2,790, while staying alert for any reversals tied to shifts in Federal Reserve guidance or easing geopolitical risks.
About the Author
James Hyerczykauthor
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.
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