Gold Price Forecast: XAU/USD bulls not ready to give up despite overbought conditions

Gold (XAU/USD) retreats slightly following an Asian session move higher to the $4,525 area, or a fresh all-time peak, though the downside remains limited amid a supportive fundamental backdrop. The US Dollar (USD) selling bias remains unabated on the back of dovish Federal Reserve (Fed) expectations, which continues to act as a tailwind for the non-yielding yellow metal. Apart from this, geopolitical uncertainties turn out to be another factor driving safe-haven flows towards the bullion.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, prolongs its weekly downtrend for the third straight day and drops to a fresh low since early October amid rising bets for further policy easing by the US central bank. The US Consumer Price Index (CPI) was surprisingly soft in November. Furthermore, signs of a cooling US labor market reinforced market expectations that the Fed will lower borrowing costs two more times in 2026. Adding to this, US President Donald Trump publicly stated his expectation for the next Fed Chair to lower interest rates during periods of strong market performance and even when the economy is performing well. This overshadows the upbeat US GDP growth figures and continues to undermine the USD, benefiting the Gold price.

A delayed report published by the US Bureau of Economic Analysis showed on Tuesday that the economy expanded by a 4.3% annualized pace during the July-September period amid resilient consumer and business spending. The reading was stronger than consensus estimates and higher than the 3.8% rise recorded in the previous quarter. The market reaction, however, turns out to be muted as the longest-ever US government shutdown is expected to weigh on fourth-quarter growth. Separately, the US Census Bureau reported that Durable Goods Orders declined 2.2% in October, following the 0.7% increase in the previous month and worse than 1.5% fall anticipated. Moreover, a sharp fall in the consumer confidence index in December suggests that households are becoming more cautious about the future.

This, in turn, favors the USD bears, which should continue to support the XAU/USD pair. Moreover, tensions linked to the United States' actions against vessels carrying Venezuelan oil, escalating the Russia-Ukraine war, and a potential new Israel-Iran conflict validate the near positive outlook for the safe-haven Gold. That said, the upbeat market mood holds back traders from placing fresh bullish bets around the precious metal amid the year-end thin liquidity. Market participants now look forward to the release of the usual US Weekly Initial Jobless Claims data for some impetus later during the North American session. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the bullion remains to the upside, and any meaningful corrective pullback could be seen as a buying opportunity.

XAU/USD daily chart

Technical Analysis

The overnight breakout through a nearly two-month-old ascending trend-channel resistance and a subsequent strength beyond the $4,500 psychological mark could be seen as a fresh trigger for the XAU/USD bulls. Adding to this, the Moving Average Convergence Divergence (MACD) line stands above the Signal line and above zero, while an expanding positive histogram suggests strengthening bullish momentum.

However, the Relative Strength Index (RSI) is flagging overstretched conditions even as buyers retain control. Should gains stall, the channel’s lower boundary at $4,203.35 acts as key support, while maintaining a positive MACD profile, and an RSI easing toward 70 would help reset conditions for trend continuation. Nevertheless, a pause would not derail the broader advance as the outlook remains positive following the breakout.

(The technical analysis of this story was written with the help of an AI tool)

(This story was corrected on December 24 at 08:04 GMT to say that XAU/USD bulls seem unaffected by overbought conditions, not overnight conditions, in the title.)