Gold Price Forecast - Gold Drops to $3,972 as Powell’s Dollar Surge Triggers 4-Day Selloff in XAU/USD

Gold Price Forecast (XAU/USD) Extends 4-Day Selloff as Dollar Surge Crushes $4,000 Support

Gold’s decline has accelerated into a fourth consecutive session, with XAU/USD sliding to $3,972.30 per ounce, marking a 0.71% daily drop and a 4.14% slide from last Friday’s $4,144 close. The metal briefly tested $3,915 before a modest rebound failed to retake the key $4,000 threshold, confirming a loss of psychological support. The correction has now erased nearly $172 in value over four days, pressured by renewed dollar strength following Federal Reserve Chair Jerome Powell’s hawkish remarks, which walked back expectations for another rate cut in December.

Powell’s Hawkish Shift Boosts Dollar and Pressures XAU/USD

While the Federal Reserve delivered a 25-basis-point rate cut, Powell’s warning that “inflation progress is not guaranteed” hit markets hard. Traders swiftly reduced the probability of a December rate cut to below 70%, sending the U.S. Dollar Index (DXY) to 99.36, its highest level since August. The stronger greenback triggered a selloff in both gold and other risk assets. As Peter Grant of Zaner Metals put it, “Powell trying to walk back expectations for a December cut proved dollar positive and gold negative.”

XAU/USD Technical Breakdown: Rejection Under $4,000 Signals Deep Correction

The technical structure of XAU/USD now shows a clear bearish sequence. A bearish pin bar formed Wednesday under the $4,000 resistance, a classic sell signal in trending markets. Gold has broken below the 50-day moving average, which stands near $3,776.45, and remains vulnerable to a deeper correction toward the $3,275–$3,441 zone, aligning with the 200-day EMA and prior consolidation area. This implies a potential 17% downside from current levels if momentum persists. The RSI remains below 50, while the MACD histogram signals weakening upside pressure — both consistent with bearish continuation.

Fibonacci and Volume Analysis Confirm Momentum Shift

Volume in gold futures surged to 64,749 contracts, approximately 34 times the average daily volume, signaling large institutional repositioning. The 61.8% Fibonacci retracement of the September 18 – October 17 bull run sits at $3,920, a level that has held as temporary support. Below it, the October 2 low at $3,820 is the next test. A full A–B=C–D retracement projects a measured downside target near $3,795, reinforcing the probability of a fifth consecutive bearish session if $3,900 breaks.

Bitcoin Correlation Reveals Broad Risk-Off Rotation

The synchronized weakness between gold and Bitcoin (BTC-USD) underscores a broader macro shift. Bitcoin fell to $108,000, its fourth straight decline, testing below the 200 EMA and the 38.2% Fibonacci level tied to July–September lows. This alignment of losses across traditional and digital safe havens signals risk aversion, not isolated commodity weakness. Both assets are being repriced under the same macro headwinds: tighter liquidity, stronger dollar, and investor rotation toward yield-bearing assets.

Fed Policy Uncertainty Reinforces Short-Term Pressure

Powell’s press conference created an unusual paradox — a rate cut accompanied by hawkish rhetoric. The Fed funds rate now sits between 3.75% and 4.00%, but investors doubt the easing cycle’s continuation. Futures imply limited cuts for 2026, undermining gold’s near-term appeal. EUR/USD’s slide below 1.1600 after Powell’s remarks further confirmed global dollar strength. Yet analysts argue this hawkish phase may be temporary. Historically, such Fed reversals have led to sharp recoveries in gold once inflation stabilizes or policy pivots re-emerge.

Medium-Term Technical Setup: 50-Day EMA Holds the First Line of Defense

Gold has remained above its 50-day EMA throughout most of 2025, but this level near $3,776 now represents a crucial pivot point. A close below it would shift the trend structure toward the 200-day EMA at $3,316, marking the lower bound of the long-term uptrend channel. Momentum indicators remain bearish but oversold, suggesting a short-term technical rebound is possible before any further decline. The MACD crossover remains negative, while RSI near 38 implies sellers are in control but losing acceleration.

Institutional Positioning and Forecasts Suggest Structural Bullishness

Despite short-term technical weakness, institutional forecasts signal strong conviction in gold’s longer-term uptrend. J.P. Morgan projects an average of $5,055 per ounce by Q4 2026, a 27% premium to current prices, while Goldman Sachs targets $4,900 by December 2026, implying 23% upside. Morgan Stanley recently lifted its 2026 forecast to $4,400, and Metals Focus foresees $5,000 by the same horizon. These projections rest on persistent global uncertainty, central bank accumulation, and fiscal deficits expected to weaken the dollar over the next 18 months.

Macro Dynamics: U.S.–China Trade Truce and Inflation Hedge Appeal

The recent Trump–Xi meeting led to a 10% reduction in China’s fentanyl-related tariffs and a partial resumption of U.S. soybean exports. The truce eased immediate trade tensions but did little to revive risk appetite. For gold, this means less geopolitical hedging pressure but continued inflation concerns. As fiscal deficits in the U.S. widen, long-term investors may re-enter gold once short-term yield competition fades. Historical patterns show that after periods of aggressive dollar rallies, gold typically rebounds by 15–20% within three months once real yields peak.

XAU/USD Technical Map: Key Levels and Scenarios Ahead

Immediate resistance is located at $4,000–$4,030, corresponding to Tuesday and Wednesday highs. A confirmed breakout above $4,150 would invalidate the short-term bearish pattern and open a retest of $4,220 and $4,380 (the previous all-time high). On the downside, a daily close below $3,900 exposes the $3,820 and $3,795 zones, while failure there could deepen losses toward $3,441–$3,275, a historically dense liquidity pocket. Traders are closely watching the RSI divergence and potential double-bottom setup forming near $3,915 — signals that often precede reversal phases.

Bitcoin Linkage and Institutional Liquidity Flows

Institutional funds remain cautious across risk-sensitive assets. Combined ETF outflows from gold and Bitcoin exceeded $600 million this week, led by BlackRock’s iShares Gold Trust (IAU) and IBIT in Bitcoin. This dual outflow pattern signals profit-taking rather than structural rotation. Historically, synchronized gold–Bitcoin outflows have marked late-stage corrections rather than new bear markets, particularly when the Fed pauses tightening and real yields stabilize.

Historical Context and Long-Term Outlook

Since 2020, gold’s deepest drawdowns following hawkish Fed shocks averaged 9–12% before reversing sharply as policy credibility weakened. With prices already 8.9% below last week’s highs, the correction fits within historical norms. Long-term structural drivers — including central bank purchases exceeding 1,000 tons annually, declining U.S. savings rates, and persistent global debt accumulation — reinforce the view that gold remains the ultimate portfolio hedge.

Verdict: Short-Term Bearish, Long-Term Bullish — Rating Hold

Based on the convergence of technical and macro factors, gold (XAU/USD) currently sits in a short-term bearish correction within an intact long-term bull cycle. A decisive break below $3,900 could trigger a retest of $3,820–$3,795, but institutional support, seasonal tailwinds, and inflation persistence keep the broader trend favorable. The preferred stance remains Hold, with accumulation zones identified between $3,776 and $3,441, and upside potential toward $4,900–$5,055 by late 2026 once the dollar rally exhausts momentum.

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