Shining Uncertainty: Gold’s Rally Faces a Test, Says WGC

Image Source: The Hindu Business Line

Gold, after a stellar rally earlier this year, is now facing the prospect of short-to-medium term pressure, according to experts from the World Gold Council. The yellow metal, which touched record highs in April, has entered a phase of consolidation as global markets digest a mix of economic, political, and technical signals.

Key Highlights

Gold prices rebounded recently, with the LBMA Gold Price PM in USD rising to $3,332 per ounce, extending year-to-date gains to 28 percent.
Despite this, technical indicators suggest that gold may remain under corrective pressure, with momentum turning lower and the risk of a deeper setback growing.
The market is closely watching the US dollar, which is showing signs of stabilization. A stronger dollar could add to gold’s consolidation phase.
The passage of a major US budget bill and the resulting increase in government debt have supported gold, but profit-taking and easing geopolitical tensions have led to recent selling pressure.
Gold has been capped below near-term resistance at $3,395 per ounce, with support levels seen at $3,325 and $3,246. A sustained move below these could trigger further declines toward $3,132.
Option traders have shown renewed bullish appetite, but volatility has softened, reflecting a calmer near-term outlook.

Factors Driving the Outlook

Technical analysis points to a market that is overbought and due for a pause or correction.
The end of the US tariff pause and ongoing trade policy uncertainty could increase financial market volatility, impacting gold’s trajectory.
Inflation expectations in the US are rising, which could eventually support gold, but for now, the market is in a wait-and-see mode.
Central bank buying and long-term structural demand remain supportive, but short-term flows into gold ETFs have moderated.

Looking Ahead

While the long-term case for gold remains intact, the World Gold Council’s analysis suggests investors should brace for potential volatility and further consolidation in the coming weeks and months. Key support and resistance levels will be closely watched as the market navigates shifting macroeconomic and geopolitical landscapes.

Sources: World Gold Council, The Hindu BusinessLine, Bloomberg

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