Gold Price Forecast: XAU Stabilizes as War Escalates and China Probe, Is the Dip Over?

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Gold faced a historic selloff as rising yields and a stronger dollar overwhelmed safe-haven demand, though geopolitical tensions and central bank buying are now helping stabilize prices.

Historic Selloff Shakes the Gold Market

Gold markets experienced a dramatic correction last week, with prices plunging more than 10% in what stands as one of the largest monthly declines in modern trading history. The metal dropped to around $4,100 per ounce, wiping out over $2 trillion in value in just a few sessions.

This sharp move exceeded earlier declines seen in recent months and highlighted a sudden shift in investor positioning. Traditionally viewed as a safe haven, gold instead came under heavy pressure as macroeconomic forces dominated sentiment. The scale and speed of the selloff underscored how quickly capital rotated away from defensive assets.

Dollar Strength and Fed Policy Drive the Decline

The primary catalyst behind the drop has been the strength of the U.S. dollar and rising bond yields. As oil prices surged, demand for dollars increased globally, placing downward pressure on gold prices.

At the same time, Jerome Powell signaled a more hawkish stance from the Federal Reserve, warning that inflation risks remain elevated. This shift caused expectations for a near-term rate cut to fall sharply.

Higher interest rates reduce the attractiveness of non-yielding assets like gold, making bonds and cash comparatively more appealing. As a result, gold’s traditional role as a store of value was temporarily overshadowed by tightening financial conditions.

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 which was also broken and last week we saw a decline below the early February low of $4,400XAU bottomed at $4,100.

Gold Chart Daily – MAs Continue to Support on Pullbacks

Gold found support at the 200 SMA (purple) which is the last technical indicator to provide support. As a result, Gold rebounded and climbed above $5,000 but the 100 daily SMA (green) turned into resistance, keeping the lid on. On the weekly chart XAU found support at the 50 SMA (yellow) and formed a doji candlestick, which signals a bullish continuation of the larger uptrend, after the pullback.

The ability to hold above $4,000 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.

Geopolitical Tensions Reignite Safe-Haven Demand

Despite the steep decline, gold found support later in the week as geopolitical risks intensified. The ongoing conflict involving Iran and the possibility of extended military operations, including potential ground involvement, have kept markets on edge.

At the same time, China’s probe into U.S. trade practices has added another layer of uncertainty, raising concerns about a renewed escalation in global trade tensions.

These developments have helped revive gold’s safe-haven appeal, allowing prices to stabilize near key technical levels after the initial selloff.

Market Focus Turns to Powell’s Upcoming Speech

Investors are now closely watching an upcoming appearance by Jerome Powell, where he is expected to provide further insight into monetary policy.

His remarks could influence expectations around interest rates, inflation, and economic growth, all of which are key drivers for gold. Any indication of prolonged tight policy could weigh further on prices, while a softer tone may offer relief.

Central Bank Buying Provides Structural Support

Beyond short-term volatility, long-term demand remains supported by central banks. The People’s Bank of China has continued its steady accumulation of gold, extending its buying streak to 16 consecutive months.

China’s growing reserves reflect a broader global trend of diversification away from dollar-based assets. This persistent demand provides an underlying floor for gold prices and reinforces confidence in its long-term role within the global financial system.

Conclusion 

Gold’s recent volatility reflects a clash between powerful macroeconomic forces and persistent geopolitical risks. While rising yields and a stronger dollar triggered a historic selloff, ongoing tensions and central bank demand have helped stabilize the market.

Looking ahead, gold remains highly sensitive to interest rate expectations and currency movements. If the dollar continues to strengthen and yields rise, downside risks may persist. However, sustained geopolitical uncertainty and structural buying could limit deeper losses, keeping gold in a volatile but supported range in the near term.

ABOUT THE AUTHOR See More

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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