Gold (XAUUSD) Price Forecast: Gold Price Future Risk Grows as Market Goes Vertical

Spot Gold (XAUUSD): Week in Review and Forecast

Spot Gold (XAUUSD) settled higher last week at $4533.21, up $194.45 or +4.48%. The move represented a clean breakout through the previous main top at $4381.44. With the market at a record high, there is no resistance. All technicians can work with are price projection targets, which aren’t necessarily resistance.

Former Resistance at $4,381 Now Key Support

The nearest support is the former top at $4381.44. As the old adage says, “old tops can become new bottoms”. The second potential support target is based on the current swing from $3886.46 to Friday’s high at $4550.15. Its 50% level is at $4218.30 as of the close. It’s flexible and moves higher as the market moves higher.

For swing chart traders, the key support is the main bottom at $3886.46. The trend will change to down according to the lower bottom rule if this level is taken out. However, without a lower top to accompany it, the momentum may actually shift to neutral.

Gold Price Stretched $1,110 Above 52-Week Moving Average

The main support and dominant trend indicator is the 52-week moving average at $3439.44. XAUUSD has held cleanly above this indicator since the week-ending October 20, 2023 so we know it is powerful. Other than the early stages of the rally from October 2023 to February 2024 when the market held closely to the moving average, it has been comfortably above.

We can deal with a steady 45-degree rise since most great rallies tend to follow this pattern. However, since the week-ending September 5, or the week that it broke out over $3500.20, the rally has been nearly vertical.

Parabolic Rally Targets Week-Ending January 10 for Potential Top

When XAUUSD topped earlier in the year in April at $3500.20, it proceeded to move sideways for 18 weeks. Price was $844.76 above the 52-week moving average at that time. At last week’s high at $4550.15, price was $1110.71 above it.

What we have is a situation where price is ahead of time. Time is 18 weeks and 18 weeks from the breakout over $3500.20 is the week-ending January 10. We’ll be watching at that time for signs of a top.

Thin Holiday Volume Drives Price Action

We all know the bullish narrative driving prices higher so there is no sense going into great detail. We have central bank buying, Fed rate cut expectations and geopolitical risks.

During the September breakout to the upside, the core driver of the rally was a rapid repricing of Fed policy. Remember that traders had gone through the entire summer expecting the Fed to hold rates steady. However, the August Non-Farm Payrolls report on September 5 showed weak jobs growth and rising unemployment. That sealed the case for an immediate rate cut, which was followed by another cut in December.

Gold Price Forecast: Vertical Moves Signal Pullback Ahead

Going into this holiday-shortened week, gold prices could be subject to manipulation and volatility due to thin volume. Nonetheless, traders have enough bullish news on their tables, including the uptrending moving average, to sustain the current upside momentum.

You should be concerned, however, about the rate of acceleration. Historically, vertical moves aren’t sustainable. This means a short-term top is near. The fundamentals are expected to remain steady, but a pullback is coming because it’s too expensive and speculators will stop buying it.

In 1979 – 1981, it was full exchange trading margins and mom-and-pop investors selling their gold and silver to break the market. What will it be this time?

More Information in our Economic Calendar.