Gold (XAU) Price Forecast: XAU Rally Extends, but Is a Reversal Coming?

Gold Pulls Back After Touching New Record

Gold futures edged lower on Thursday after briefly hitting a fresh all-time high, as traders locked in profits. Despite the decline, the broader uptrend remains intact, with prices still hovering above key support levels. Spot gold remains near $3,050, well above the 50-day moving average of $2,860.98, signaling strong bullish momentum but also making the market vulnerable to short-term corrections.

Gold has notched 16 record highs this year, with four above $3,000. The rally has been fueled by expectations of Federal Reserve rate cuts, persistent inflation, and geopolitical tensions. Traders remain focused on central bank policy and external economic risks, both of which continue to support gold as a hedge.

At 09:30 GMT, XAU/USD is trading $3044.77, down $2.36 or -0.08%.

Fed’s Rate Cut Plans Fuel Gold’s Strength

The Federal Reserve held interest rates steady at 4.25%-4.50% but reiterated its outlook for two cuts later this year. Gold benefits from lower rates, as they reduce the opportunity cost of holding non-yielding assets. Despite maintaining its forecast, Fed Chair Jerome Powell emphasized economic uncertainty, driven by inflationary pressures from U.S. trade tariffs.

The Fed raised its 2025 inflation forecast to 2.7%, up from 2.5%, well above its 2.0% target. Powell suggested tariff-driven inflation may be temporary, but some economists warn it could be more persistent. Meanwhile, GDP growth projections were cut to 1.7% from 2.1%, increasing fears of stagflation and raising doubts about the Fed’s ability to ease policy as planned.

Geopolitical and Economic Uncertainty Drive Demand

Gold’s rally has been reinforced by geopolitical risks and economic concerns. U.S. President Donald Trump’s tariff policies have raised fears of prolonged inflation, while U.S.-China trade tensions remain high.

Meanwhile, Middle East conflicts continue to drive safe-haven demand. On Thursday, Israeli airstrikes killed 37 Palestinians in Gaza, reigniting regional tensions. With economic instability persisting, gold remains a preferred store of value.

Market Outlook: Correction Possible, But Bullish Trend Holds

While gold’s long-term outlook remains strong, a short-term correction is possible. Nicholas Frappell of ABC Refinery noted resistance near $3,090-$3,100, where some profit-taking is expected. However, past pullbacks have been brief, with buyers quickly stepping in.

With inflation concerns, trade tensions, and geopolitical risks persisting, gold is likely to remain well-bid. Any dip could offer a buying opportunity, as long-term fundamentals continue to favor higher prices.

More Information in our Economic Calendar.