Gold (XAU) Price Forecast: Will $2,538 Support Spark a Rebound or Deeper Losses?

Prices Hold Steady as Market Finds Support Near Key Levels

Gold prices steadied on Friday, hovering around $2,546.86 to $2,538.50, critical support levels underpinned by technical and fundamental factors. The first level reflects the September 18 bottom, while the latter represents a significant 50% Fibonacci retracement level. Despite the downward trend on the daily chart, traders eye a potential short-term rally, driven by short-covering, with targets including $2,604.39, the 50-day moving average at $2,651.98, and a pivot at $2,668.52.

However, if $2,538.50 gives way under selling pressure, a steep decline toward $2,471.91 could materialize next week.

Gold Set for Largest Weekly Drop in Three Years

Gold faces its sharpest weekly loss in over three years, down over 4%, as reduced expectations for aggressive Federal Reserve rate cuts have strengthened the U.S. dollar. A stronger dollar, which recorded its biggest weekly gain in more than a month, has made gold less attractive to holders of other currencies. Additionally, rising U.S. Treasury yields further pressured non-yielding gold, with the 10-year yield climbing to 4.451%, up from 4.31% a week ago.

Economic data added to gold’s challenges. October U.S. retail sales increased by 0.4%, surpassing the 0.3% forecast. Upward revisions to September sales further reinforced the view of economic resilience. Core inflation metrics remained above the Fed’s 2% target, with annual core CPI at 3.3%.

Fed Chair Powell’s Comments Weigh on Bullion

Federal Reserve Chair Jerome Powell signaled no urgency to lower interest rates, citing robust economic conditions. Following these remarks, market expectations for a December rate cut dropped to 59%, down from 83% earlier in the week. Higher interest rates reduce the appeal of gold, a non-yielding asset, intensifying selling pressure.

Market Forecast

Gold’s outlook remains bearish in the short term, as fundamental pressures from a stronger dollar, rising yields, and reduced rate-cut expectations weigh on prices. However, traders will monitor upcoming Fed official remarks and any potential geopolitical developments for new directional cues. A decisive break below $2,538.50 could lead to extended losses, while sustained buying near current levels might spark a technical rebound toward $2,651.98.