Gold Surges 65% in 2025, But $4,256 Support Now Defines the Next Move
Gold prices went into reverse gear after an absolutely astonishing rally that catapulted XAU/USD to $4350 earlier this week.
Quick overview
- Gold prices have reversed after a significant rally, peaking at $4350 earlier this week, but remain up 65% in 2025.
- The Federal Reserve's recent rate cut has reinforced gold's appeal, although market expectations for further cuts have cooled.
- Geopolitical tensions continue to support gold prices, but higher margin requirements and profit-taking are capping upside potential.
- Technical indicators show gold trading around $4317, with critical support at $4256, and a potential bearish outlook if it falls below this level.
Gold prices went into reverse gear after an absolutely astonishing rally that catapulted XAU/USD to $4350 earlier this week. The metal is still up a whopping 65% in 2025, which has got to be the strongest annual performance since 1979. But the momentum has slowed down significantly.
The earlier surge was largely driven by expectations that the Federal Reserve would follow up with even more interest rate cuts in 2026, which would continue to put real yields under pressure and keep gold as a safe-haven investment very much in the picture. On top of that, geopolitical risk also loomed large, with tensions between Israel and Iran and renewed strain between the US and Venezuela spooking investors into seeking safer assets.
Fed Policy Keeps Gold in Focus
The Federal Reserve’s latest 25-basis-point rate cut, which lowered rates to 3.50% to 3.75%, only reinforced gold’s long-term appeal, even though Fed officials remain divided about what to do next. The December meeting minutes made it clear that most are open to more easing if inflation really starts to slow.
But, it looks like the market is now downplaying the chances of an immediate rate cut in January – the CME FedWatch now says there’s only about a 15% chance of it happening, which has definitely cooled some of the near-term enthusiasm and contributed to gold’s recent price pullback.
Geopolitics Support, Margins Cap Upside
Ongoing geopolitical uncertainty is still providing a solid floor under prices, but the upside is getting more balanced.
Some of the key headwinds are:
- Higher CME margin requirements for gold and silver futures, which are making it more expensive to hold positions
- Profit-taking after those record highs
- Reports that we might actually be seeing some progress towards a peace deal in Ukraine, which could reduce the demand for safe-haven assets
Gold (XAU/USD) Technical Levels Now Matter More
On the 4-hour chart, gold is currently trading at about $4317, down from the $4550 peak. Price has dropped below the rising channel midline and also below the 50-period EMA, while the 200-period EMA at $4256 is acting as a critical support level at the moment.
The pullback is lining up with the 38.2% / 50% Fibonacci retracement levels, and the RSI is at 38, which is still pretty bearish without being oversold. If we stay above $4256, then the bigger trend remains intact. A break below would open up $4180.
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