Until the last few days, gold had been on a tear, smashing records and surging past the $3,000 mark last week, fuelled by strong safe-haven demand and persistent central bank buying. After easing slightly at the end of last week, gold has struggled to find renewed bullish momentum so far this week. Is that a sign of things to come or will gold find even more buying interest even at these levels? So far, the bullish trend remains intact, keeping the gold outlook positive. But there are a few factors worth considering which could undermine the rally.

Gold outlook: What factors can bring gold prices lower?

Fundamentally, there are several potential headwinds that could undermine the gold outlook – none of which have played out so far. For example, if geopolitical tensions ease—think Trump’s promises to resolve conflicts in Ukraine and Gaza—then it can be assumed that safe-haven demand for gold could fade. Additionally, high prices might motivate miners to ramp up supply, although that’s another big assumption as supply adjustments are not always easy to achieve. Meanwhile, elevated prices could also temper central bank appetite for further purchases.  Another factor to watch: US equities. If stock markets stabilize or extend the recent recovery, some investors may rotate out of gold and back into risk assets.

Can be a long wait until core PCE price index

In the short term, gold’s path will likely hinge on the direction of US dollar and upcoming economic data, in particular, Friday’s release of the Fed’s preferred inflation gauge—the core PCE Price Index.

Recent inflation data have been mixed. Softer-than-expected CPI and RPI prints earlier this month clashed with the University of Michigan survey, which flagged rising inflation expectations. Jerome Powell has tried to soothe markets by pointing out that long-term expectations remain anchored, but uncertainty lingers. Markets are bracing for a potential +0.3% month-on-month increase in core PCE. The actual reading could be different, which could influence gold’s next move through its impact on the dollar and rate expectations.

Technical gold outlook: bulls still in control (for now)

Source: TradingView.com

Technically, the price of gold looks stretched on the long-term time frames, and a correction might be overdue. On the daily time frame, while gold’s rally may be losing steam, it still remains in the “buy-the-dip” mode. The key question is: has it dipped deep enough to lure the bulls to step in again?

Gold’s trend on the daily time frame remains firmly bullish until the chart tell us otherwise. With that in mind, it is worth keeping a close eye on support levels for trading opportunities.

• $3,000: This psychologically significant level held firm on Friday’s retest, confirming bullish control. A break below could trigger long liquidations until prices potentially reach…
• $2,930-$2,956: This zone, the former breakout area, also aligns with the 21-day exponential moving average and trendline support.

For now, gold has encountered resistance at the $3,032-$3,043 Fibonacci extension zone, where the 161.8% and 200% extensions of two prices swings converge (see chart). While prices did briefly hit a new high of $3,057 last week, the metal closed the week below that Fibonacci pocket, suggesting short-term momentum has softened.

Gold outlook long-term overbought signals need to be addressed

Gold’s longer-term charts are flashing overbought warnings. The monthly RSI, for example, has stayed above 70 since April 2024 and recently touched 80, a level that has historically led to pullbacks. Similar patterns were seen at major peaks during 2011 and the pandemic era. The weekly RSI near 75 adds to the cautionary tone.

While this doesn’t guarantee an imminent reversal, the conditions are ripe for some consolidation or a healthy correction before the next leg higher.

— Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R