Gold Price Forecast: Testing Key Support at $5,000 but Fed’s Powell Could Trigger Major Move

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Gold prices are entering a pivotal week as investors weigh escalating geopolitical tensions against the upcoming Federal Reserve meeting, where signals from Jerome Powell could determine whether the precious metal resumes its rally or extends its recent pullback.

Gold Retreats Despite Escalating Conflict

Gold prices declined sharply last week, falling roughly 3% and sliding back toward the $5,000 level. The drop came despite rising geopolitical tensions in the Middle East, which would normally support safe-haven assets.

Instead, the main driver behind the decline was a stronger U.S. dollar, which tends to pressure gold prices since the metal is priced in dollars. During the week, XAU/USD dropped more than $400, surprising many market participants who expected conflict-driven demand to push prices higher.

The escalation of tensions involving the United States, Israel, and Iran has increased uncertainty across global markets. Reports that Washington is preparing a multinational naval coalition to escort ships through the Strait of Hormuz highlight the risk of disruptions to global energy supply.

President Donald Trump has also reportedly asked several countries, including China, to assist in ensuring the waterway remains open.

Despite these developments, gold has struggled to maintain upward momentum as investors move into the U.S. dollar instead.

Oil Above $100 Complicates the Inflation Outlook

Energy markets have added another layer of complexity to the global economic outlook.

Prices for West Texas Intermediate crude oil have surged above $100 per barrel, raising concerns about renewed inflationary pressures. Rising energy costs typically feed into transportation and production expenses across the economy, which can keep inflation elevated.

At the same time, the latest labor data showed signs of weakening economic momentum. The February jobs report indicated the U.S. economy lost approximately 92,000 jobs, pushing the unemployment rate up to 4.4%.

Meanwhile, core inflation remains at 2.5%, still high enough to complicate the Federal Reserve’s policy outlook.

This unusual combination—rising energy prices, weakening employment data, and persistent inflation—has created a complex backdrop for policymakers.

The Federal Reserve Meeting Takes Center Stage

The upcoming Federal Open Market Committee meeting on March 18 is now the most important event for gold markets.

This will be one of the final meetings chaired by Jerome Powell before his term expires in May, adding further significance to the policy signals delivered during the press conference.

Investors will closely examine the updated Fed “dot plot,” which outlines policymakers’ expectations for future interest rate movements.

Gold’s relationship with the Fed is relatively straightforward in theory:

• Rate cuts typically weaken the dollar and lower real yields, which supports gold prices.
• Hawkish policy signals or higher rates strengthen the dollar and increase real yields, which tends to pressure gold.

However, the conflicting economic signals currently facing the Fed make the outcome less predictable than usual.

Two Possible Scenarios for Gold

If Powell emphasizes that high oil prices and persistent inflation require continued caution, markets may interpret this as a signal that interest rates will remain elevated for longer. In that case, the U.S. dollar could strengthen further, pushing real yields higher and putting additional pressure on gold prices.

On the other hand, Powell may acknowledge the weakening labor market and slowing economic momentum. If he signals that the Fed still expects to cut interest rates later in 2026, gold could quickly regain upward momentum.

The recent jobs data provides policymakers with some justification for a more cautious stance toward future tightening.

Institutional demand for GOLD also remains strong. Global gold exchange-traded funds saw record inflows of roughly $19 billion in January 2026, highlighting continued investor interest in the metal as a long-term hedge.

Even during the largest single-day declines in recent years, major U.S. gold ETFs have not experienced significant outflows.

Technical Damage — But a Crucial Hold

Technically, the correction was severe. Gold broke decisively below its 20-day simple moving average, ending a streak of consistent trend support.

Attention quickly shifted to the 50-day moving average near $5,000. Crucially, that level has to hold or the trend to remain bullish and buyers to remain in charge, otherwise the panic might set in if the price falls below $5,000.

Gold Chart Daily – MAs Continue to Support on Pullbacks

The ability to hold above $5,000 carries psychological importance. Reclaiming such a major round-number threshold often stabilizes sentiment, especially after a period of forced liquidation. While volatility remains elevated, the ability to defend longer-term trend support suggests that structural buyers remain active.

Central Bank Buying Supports the Long-Term Outlook

Another key structural driver behind gold’s strength has been consistent buying from central banks.

The People’s Bank of China has extended its gold-buying streak to 16 consecutive months, continuing its strategy of diversifying reserves away from traditional foreign currency assets.

China’s gold holdings reached 74.22 million troy ounces, with the total value of these reserves rising to nearly $387 billion.

This steady accumulation has made China one of the largest buyers in the global gold market, providing long-term support even during short-term price corrections.

Outlook: Gold now sits at a crucial turning point. The metal’s recent decline has raised questions about whether the rally may have become overextended after months of strong gains.

The direction of gold prices in the coming weeks will likely depend on two critical factors: the Federal Reserve’s policy outlook and geopolitical developments.

If the Fed signals future rate cuts and geopolitical tensions remain elevated, gold could rebound sharply—potentially retesting the $5,400 level.

However, if the dollar continues to strengthen and interest rate expectations remain high, gold may face further consolidation around the $5,000 region before its next major move.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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