By Rania Gule, Senior Market Analyst at XS.com – MENA
In light of recent developments in global markets, gold continues to spark debate among investors and analysts over the direction it may take in the near term. The precious metal has managed to regain some positive momentum after a period of decline, benefiting from the slight weakness in the U.S. dollar and renewed demand for safe-haven assets. However, the picture is far from one-sided; behind the scenes lies a mix of conflicting factors that make forecasting gold’s future path a delicate task—one that requires a careful reading of monetary, political, and economic developments altogether.
From my perspective, the current movement in gold appears more like a “technical correction supported by psychological factors” rather than the start of a strong new bullish wave. The weakness in the U.S. dollar certainly provides some support for the metal, but that support seems fragile given the Federal Reserve’s continued relatively hawkish stance. Although the Fed recently cut interest rates by 25 basis points, Chair Jerome Powell’s statements effectively curbed market expectations for further rate cuts in the near term, which has dampened investor appetite for non-yielding assets such as gold. Consequently, any attempts by gold to break above current resistance levels may face strong headwinds as long as U.S. monetary policy remains relatively tight.
At the same time, renewed global economic concerns are providing gold with some psychological support, especially amid lingering uncertainty surrounding global trade prospects between the United States and China. Despite the cautious optimism expressed by U.S. President Donald Trump regarding the outcome of discussions with his Chinese counterpart Xi Jinping, markets have yet to translate that into full confidence. Past experiences have taught investors that “trade optimism” often fades at the first sign of a negotiating obstacle or a hawkish statement. Therefore, gold is likely to retain part of its appeal as a safe haven, particularly as the U.S. economy enters a phase of relative slowdown and discussions about the possibility of a technical recession resurface for the coming year.
Historically, gold has proven to be more sensitive to future interest rate expectations than to actual policy decisions. Based on my current reading of the Fed’s direction, the central bank seems keen to keep market expectations disciplined, avoiding the formation of a broad belief that the easing cycle is ongoing. This means that any strong economic data in the U.S.—particularly in labor or inflation—will put renewed pressure on gold and limit its ability to achieve sustained gains. Conversely, any signs of weakness in consumer spending or industrial production could restore gold’s shine and encourage investors to re-enter long positions.
Another factor offering temporary support for gold is the ongoing political deadlock in the United States, particularly the government shutdown that has cast a shadow over market confidence. These developments undermine trust in U.S. fiscal and economic performance, prompting some investors to seek safer assets. However, I believe this factor’s influence will be short-lived; once a political compromise is reached, gold will likely lose part of this temporary support.
On the other hand, it should be noted that part of gold’s recent gains may be due to short-term short-covering rather than genuine investment demand. This makes the current uptrend vulnerable to sudden corrections if U.S. dollar data improves or new signs of global economic resilience emerge. Therefore, I believe any sharp moves above key psychological resistance levels will require stronger fundamental momentum—perhaps stemming from an actual shift in the Fed’s tone or a renewed escalation in geopolitical tensions.
That said, gold undeniably retains its core role in investment portfolios as a hedge against risk, particularly amid ongoing global uncertainty. It is likely to maintain a balanced trading range between $2,280 and $2,330 per ounce in the coming days, with potential to test higher levels only if speeches from Federal Open Market Committee members show a clearer tilt toward monetary easing. Until then, the yellow metal seems set to move within a sideways, volatile range that reflects the prevailing sense of market caution.
In conclusion, gold currently stands at a delicate crossroads between psychological support and monetary pressure. The limited weakness in the U.S. dollar provides short-term breathing room, but the Fed’s hawkish tone and market confidence in U.S. economic stability impose a clear ceiling on any major bullish breakout. In my view, it is still too early to speak of a new sustainable uptrend unless we witness a tangible shift in U.S. monetary policy or a significant resurgence in global economic fears. Until then, gold will likely remain in a fragile balance—shining with temporary brilliance, yet without the lasting luster to propel it to new highs.