Gold (XAU) Price Forecast: Will Safe-Haven Flows Offset Rising Yields Ahead of CPI?

Can Gold Maintain Its Momentum as Yields and the Dollar Surge?

Gold (XAU/USD) wrapped up the week at $2689.38, climbing $49.65 or 1.88%, to its highest close in four weeks. The rally stood out against a backdrop of a surging U.S. dollar and rising Treasury yields, highlighting the metal’s enduring safe-haven appeal.

The pivot at $2663.51 remains the decisive level for gold’s next move. Traders are watching this zone closely as the metal enters a critical juncture.

Why Are Safe-Haven Flows Driving Gold Higher?

Gold’s rally defied typical market behavior as the 10-year Treasury yield soared to 4.79% and the U.S. dollar hit multi-year highs. Such conditions usually pressure gold due to higher opportunity costs and less favorable pricing for non-dollar buyers.

However, deepening concerns about U.S. fiscal health and ballooning deficits have reignited demand for gold as a safe haven. Brien Lundin of Gold Newsletter captured this sentiment: “Dollar strength, rising Treasury yields, and a rising gold price are all evidence of global concerns with the U.S. fiscal situation.”

Central banks have accelerated gold purchases, and individual investors are following suit, wary of inflation risks and signs that the Federal Reserve may struggle to control the bond market.

Is Inflation the Next Catalyst for Gold Prices?

December’s jobs report painted a picture of a strong labor market, with 256,000 jobs added and the unemployment rate dropping to 4.1%. This robust growth has fueled worries about persistent inflation, complicating the Federal Reserve’s strategy for rate cuts in 2025.

The spotlight now shifts to January 15, when the Consumer Price Index (CPI) data will provide a clearer view of inflation trends. A higher-than-expected print could jolt financial markets, driving up Treasury yields and potentially lifting gold as an inflation hedge.

What Price Levels Are Crucial for Traders Now?

The weekly trading range of $2790.17 to $2536.85 highlights gold’s critical levels. A sustained move above the $2663.51 pivot could propel prices toward $2726.30, the December high, and even challenge the all-time high at $2790.17.

On the downside, a drop below $2663.51 may lead to a test of $2631.04. Deeper declines could target key support zones at $2571.68 and $2533.76, with $2387.23 as a potential long-term floor.

Gold Market Forecast: Will CPI Drive the Next Breakout?

Bullish Case: A hot CPI print may heighten inflation fears, boosting gold demand and pushing prices toward $2726.30 or even the $2790.17 all-time high. Continued fiscal concerns and geopolitical uncertainty would further reinforce the rally.

Bearish Case: Softer CPI data could ease inflation fears, sending Treasury yields higher and weighing on gold. This scenario may push prices toward $2631.04 and lower support zones.

With CPI and bond markets in focus, traders should prepare for heightened volatility. The coming week’s data may define whether gold builds on its recent gains or faces renewed pressure.

More Information in our Economic Calendar.