Gold Price Forecast: XAU/USD Drops 4% From $5,450 Peak as $5,160 Becomes the Market’s New Test
Gold (XAU/USD) has run into its first real obstacle after a strong start this month. After climbing over 25% and reaching several record...
Quick overview
- Gold (XAU/USD) has experienced a significant pullback after reaching record highs, currently trading around $5,160.
- The recent drop is attributed to profit-taking and a stronger US dollar following a government funding deal, easing short-term risks.
- Despite the decline, geopolitical uncertainties continue to support gold prices, preventing larger sell-offs.
- Technical analysis indicates that gold is testing key Fibonacci levels, with a bullish trend remaining intact as long as prices stay above $5,000.
Gold (XAU/USD) has run into its first real obstacle after a strong start this month. After climbing over 25% and reaching several record highs above $5,400, prices have pulled back sharply and are now around $5,160, with an intraday low near $5,112.
This move seems more like a normal reset than panic. A big bearish daily candle erased gains from several previous sessions, which is a common sign of profit-taking after a steep rally.
Many investors saw the deal in Washington to prevent a US government shutdown as removing a short-term risk. This boosted the dollar and led traders to take profits.
Dollar Strength Pressures Gold, But Limits Remain
The US dollar got stronger after lawmakers agreed to fund the government through the end of the year, which eased shutdown worries and put short-term pressure on gold. However, the dollar’s gains are limited by ongoing uncertainty about future US monetary leadership and interest-rate policy.
Right now, markets are watching a few key events:
- The upcoming US Producer Price Index (PPI)
- Comments from Federal Reserve officials
- Signals around the next Fed chair appointment
These events will influence rate expectations and help decide if the dollar stays strong or loses ground soon.
Geopolitical Risks Keep a Floor Under Prices
Even with the recent drop, gold still gets support from global uncertainty. Ongoing trade tensions, tariff threats, and unresolved geopolitical conflicts are still on investors’ minds.
Continued military deployments and unresolved diplomatic standoffs keep demand for safe-haven assets like gold steady, stopping bigger sell-offs.
This situation helps explain why selling has slowed as prices fall. Long-term buyers seem more patient, waiting for better technical levels instead of chasing the rally.
Gold (XAU/USD) Technical Outlook: Fibonacci Levels in Focus
Looking at the charts, gold is now testing a key area. The price has dropped below the 23.6% Fibonacci retracement at $5,288 and is now near the 38.2% level around $5,095, which often acts as a support zone in strong trends.
Key technical signals:
- RSI cooled from above 75 to ~69, easing overbought conditions
- Price remains above the 50% retracement at $4,940
- The rising trendline from December lows is still intact
If gold stays above the $5,000 to $4,940 area, the overall bullish trend is still in place.
Trade idea: Look for long positions near $5,000, aiming for $5,350, and set a stop below $4,780.
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