Gold Weekly Forecast: Recovery continues, but fresh buying is needed to extend gains

The week in retrospective

The precious metal started the week in quite a bearish mood, further extending the almost uninterrupted leg lower after August tops near the $4,700 mark per troy ounce.

However, market sentiment made a U-turn in the second half of the week. It was not the Federal Reserve (Fed), reignited geopolitical tensions, the US Dollar (USD) or Treasury yields.

This time the catalyst for the ongoing recovery in Gold prices has been the marked retracement in prices of crude Oil, both the American (WTI) and European (Brent) benchmarks.

So, broadly speaking, declining crude Oil prices work against expectations of higher consumer prices, which in turn prompts the Fed to maintain its (now reinforced) cautious stance.

And a direct consequence of the latter was an extra impulse from short covering, as the vast majority of traders were positioned for lower prices in tandem with the widely anticipated rate hike by the Fed on Wednesday.

Gold longs hold firm, but crowding risk rises

Gold bullish positioning strengthened modestly in the week ending September 8, according to the Commodity Futures Trading Commission (CFTC). That said, net speculative positioning rose to almost 232K contracts, reversing part of the previous week’s decline. However, the 4-week change eased sharply to just over +14K contracts, showing that the broader bullish momentum is cooling.

Additionally, open interest fell to around 411.2K contracts. Net longs are building, but overall participation is declining, suggesting the rally was driven by short covering rather than new long positions. This indicates a tactical improvement in positioning, but not a revival of conviction among participants.

Also, the speculative exposure increased to 56.41%, with its percentile rising to an unbelievably high 98.4. Gold exposure is therefore historically stretched, even though the Net Position Percentile remains more moderate at 73.5. This divergence suggests that exposure relative to open interest is close to extreme levels, raising the risk of a crowded long trade.

Overall, non-commercial positioning in the yellow metal remains firmly bullish, but the signal is becoming more mature and vulnerable to a correction. The positive weekly change and short-covering support the upside bias, yet slowing 4-week momentum and an extremely elevated exposure percentile warn that further gains may require fresh long participation rather than continued position adjustment.

Gold demand diverges across Asia

From another perspective, physical Gold demand in India was muted this week as buyers refrained from making any more purchases at high prices, with the likelihood of a near-term fall prompting a wait-and-see approach.

However, in China, premiums meanwhile remained stable with demand growing, not least from investors wanting to have exposure to the yellow metal as a store of value and to protect against market volatility.

This “gap” indicates a cautious Indian market but better underlying appetite in China, where investment demand continues to be supportive.

What’s next for Gold

The main focus of attention next week will be the long-awaited Trump-Xi Summit on Thursday, whereas flash releases of business activity for the current month should also garner some interest.

Technical analysis

In the daily chart, XAU/USD trades at $4,363.52, holding below the long-term 200-day simple moving average (SMA) at $4,541.17, which keeps the broader tone capped despite price stabilizing over its medium- and short-term baselines. The metal sits above the 100-day SMA at $4,320.72 and the 55-day SMA at $4,273.00, suggesting a corrective bounce within a larger bearish context, while the Relative Strength Index (14) around 50 and a softening Average Directional Index (14) near 16 hint at fading trend strength and a consolidative phase rather than impulsive direction.

On the topside, immediate resistance is defined by the 200-day SMA at $4,541.17, and bulls would need a sustained break above this barrier to ease the prevailing downside bias. On the downside, initial support is found close to the current area with the 100-day SMA at $4,320.72, followed by the 55-day SMA at $4,273.00, where a daily close below the latter would likely reopen the path toward deeper retracements in the coming sessions.

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

Gold’s recovery still has something to prove

Gold has managed to regain its footing, but the rebound is not yet strong enough to be considered a fresh bullish leg.

Lower Oil prices, a cautious Fed, and steady Chinese investment demand could keep the metal supported in the near term, with a sustained return towards the $4,700 area per troy ounce remaining possible if the Greenback and Treasury yields cool off.

A Trump-Xi summit could also be a trigger, particularly if it raises demand for defensive assets or affirms expectations of a less confrontational global trade environment.

Still, the risks are becoming more balanced. With speculators’ exposure already close to historical extremes, the precious metal may struggle to extend its advance without a fresh wave of long buying.

A renewed rise in crude Oil, firmer US Treasury yields, a stronger buck or disappointing headlines from the Trump-Xi meeting could trigger profit-taking. For now, the outlook remains cautiously constructive, but the next leg higher will probably require more than short covering: it will need new money, stronger physical demand and a clearer reason for investors to keep adding to their positions.